thefuture ofhousing · 2019-04-04 · the dramatic upheaval in our housing and financial systems in...

The Futureof HousingRethinking the UK housing systemfor the twenty-first century

Consultation at St George’s House, Windsor Castle23rd – 25th June 2009

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The Building and Social Housing Foundation(BSHF) is an independent researchorganisation that promotes sustainabledevelopment and innovation in housingthrough collaborative research andknowledge transfer.

Established in 1976, BSHF works both in theUK and internationally to identify innovativehousing solutions and to foster the exchangeof information and good practice. BSHF iscommitted to promoting housing policy andpractice that is people-centred andenvironmentally responsible. All researchcarried out has practical relevance andaddresses a range of current housing issuesworldwide.

BSHF – Promoting innovative housing policyand practice

Building and Social Housing Foundation

Memorial Square

Coalville

Leicestershire

LE67 3TU

Tel: +44 (0)1530 510444

Fax: +44 (0)1530 510332

Email: [email protected]

Web: www.bshf.org

Charity number: 270987

Price: £10.00 7420917819019

ISBN 978-1-901742-09-1



The Future of Housing | 1

Prepared by Diane Diacon, Ben Pattison and Jim VineDesign by www.soapboxcommunications.co.uk

Published October 2009© Building and Social Housing Foundation 2009

ISBN 978-1-901742-09-1

Printed on FSC certified paper

Extracts from the text of this publication may be reproduced without furtherpermission provided that the source is fully acknowledged.

Contents

Foreword 3Executive summary 4

1 Where are we now? 6The current UK housing system is dysfunctional 6We have an historic opportunity for change in the housing system 13

2 Where do we want to be? 16Objectives for the housing system 16

3 How can we get there? 18A serious discussion on reforming the UK housing system 18Key areas for attention 18

4 Improving the UK housing system: some key questions 22Finance of housing 22Increasing supply – finance and institutional change 28Increasing supply – land, planning and construction 37Existing housing stock 42Enhanced tenure options and flexibility 45Creating place/neighbourhoods 47Research and the evidence base 50

Participants at the Consultation 52References 54

2 | The Future of Housing

The dramatic upheaval in our housing andfinancial systems in the last 18 months hascreated a timely opportunity to review howwe can change our ailing, and failing, housingsystem. Such opportunities for far-reachingchange arise only rarely. Set against abackdrop of the unprecedented complexity ofour society, the ageing of our people and arapidly changing climate, the weaknesses ofthe current system highlight the need for asignificant change in how housing isprovided, financed and managed in theUnited Kingdom.

In June 2009, a wide range of experiencedpractitioners and academics from differenthousing-related disciplines met for threedays of discussion and debate at St George’sHouse in Windsor Castle. Participantsincluded those with experience fromContinental Europe and North America aswell as the four nations of the UnitedKingdom, enabling a wider perspective to beshared. Prior to the meeting several of theparticipants had prepared papers setting outpossible responses to the current housingproblems faced.

I was very pleased that Lord Best, OBE wasable to chair this Consultation at St George’s

House, which was coordinated by theBuilding and Social Housing Foundation.Twenty-five years earlier, Lord Best wasinvited by the Duke of Edinburgh tocoordinate the Inquiry into British Housing,which provided an overview of the state ofBritish housing in the mid-1980s and made arange of suggestions for future action. TheConsultation addressed the same three vitalquestions in relation to housing in the UK asthe Inquiry into British Housing had donemany years ago: ‘where are we now?’, ’wheredo we want to be?’ and ‘how can we getthere?’.

This report is the outcome of ourdeliberations so far. We hope that it willstimulate further debate and, moreimportantly, urgent action to address some ofthe challenges faced by the housing system.

We have not merely created a wish list ofactions that we expect others to deliver. Thosepresent at the Consultation will be seeking todevelop and implement a number of theproposals that have been outlined. Wewelcome others to join us in this process ofresponding to the challenges that we face inproviding decent housing for everyone in theUK.


ForewordDiane Diacon, Director, BSHF

The UK housing system is large and complex,being intrinsically linked to almost everymajor area of government policy. It hasbecome increasingly flawed and now hassignificant dysfunctional components.Addressing the housing system as a whole isno small task, but can be approached byasking three fundamental questions – ‘whereare we now?’, ‘where do we want to be?’ and‘how can we get there?’.

Where are we now?

The breadth and depth of the flaws in thehousing system in the UK are illustrated by anumber of failings, including the:

� Negative impact of the housing systemon the wider UK economy;

� Increasing unaffordability of housing formany people;

� Failure of housing supply to respond tochanges in demand;

� Unsuitability of the housing stock forcurrent and future needs;

� Failure to meet acute housing need.

We now have a rare opportunity torespond to the challenges posed by thedysfunction in the current system, to evaluatethe role that housing should play in societyand to act to deliver changes that willimprove the system. There is now awidespread recognition of the need toaddress the failure of the current system as awhole, rather than tinker with variouscomponent parts. This historic opportunity to

improve the UK housing system has arisenwith the convergence of a number ofsignificant changes. These include changesthat have occurred within the housing system,such as the re-emergence of the privaterented sector, and changes in the widereconomy including the nationalisation ofmajor UK mortgage lenders. Viewed together,this combination of changes will cause majorshifts in the housing system. Withoutintervention these changes are likely toincrease the dysfunction in the system, butwith the right programme of actions they alsoprovide an opportunity to make changes thatwould lead to significant improvements.

Where do we want to be?

Participants at the Consultation accepted, as abroad direction of travel, the view of Europe’snot-for-profit housing providers that “ahousing system should provide access todecent and affordable housing for all, incommunities which are socially, economicallyand environmentally sustainable and whereall are enabled to reach their full potential”.Although we recognise that radical changewill take a decade or more to deliver, the firststeps on the path lie in defining what it is weexpect the housing system to achieve. Theseshould include:

� A decent roof over everyone’s head;� A home fit for the future;� Affordability and stability;� A decent neighbourhood to live in;� Recognition of housing as a system.


Executive summary

How can we get there?

The Consultation identified a need for furtherexamination of the housing system as awhole. Outlined below are eight key areas forattention. Examination of these eight areas,and how they work together, would form thebasis of just such a systemic review.

1. Reforming the role of taxation in thehousing system. Taxation could be usedmore effectively to help deliver decenthousing for everyone. In-depthassessment of the merits of differentforms of property or land taxationdeserves particular attention.

2. Addressing house price volatility.Reducing house price volatility wouldbenefit many individuals, as well as thewider economy.

3. Retrofitting of the existing stock toreduce carbon emissions. The governmentand many other stakeholders recognise theneed to improve existing housing stock toreduce household carbon emissions. Anumber of barriers will need to be overcomeif the intention for large-scale retrofittingis to be quickly turned into a reality.

4. Reviewing the effectiveness of housingsupport systems. The current provision ofhousing support should be reassessed,particularly in regard to whether income-based rather than tenure-based supportwould be more effective.

5. Increasing the range of housingproviders. A broader range of housingproviders would increase the overall levelof supply, as well as helping to reducevolatility in its delivery and deliveringgreater choice.

6. Improving the flexibility of tenurestructures. It is time to assess how amore flexible, yet reasonably secure,tenure system could work in practice.

7. Undertaking a regulatory audit. It isnecessary to understand whether currentregulations throughout the housingsystem support the provision of decenthousing or create unnecessary barriersand have other unintended negativeconsequences.

8. Encouraging innovation. Providingdecent housing and responding tochanging housing needs within societywill require innovation in all aspects ofthe housing system including design,construction and finance.

Many important proposals for change arerelatively well developed and could beimplemented quickly. Other proposals requirefurther discussion and would take asignificant amount of time and research todevelop fully. A detailed examination of thepotential of a range of policy and practiceoptions is provided in the final section:‘improving the UK housing system: some keyquestions’.

Executive summary


The UK housing system is large andcomplex1. The system includes 26 millionexisting dwellings2 and new supply fromdifferent types of providers. It includes a rangeof relationships between owners and occupiersof homes; these different tenures includeowner occupation and a variety of rentaltenures in the private, not-for-profit and localauthority sectors. The system also contains awide range of financial components, includingmortgage provision, different forms ofgovernment subsidies and taxation of bothhousing transactions and occupation.

Owner occupation dominates the UK housingsystem with 70 per cent of householdsoccupying their homes under this form oftenure. Rental accommodation is providedeither by private landlords (12 per cent) orby subsidised social rental providers, such aslocal authorities and housing associations (18per cent)3. The dominance of owneroccupation is a relatively recent phenomenonthat may be shifting with the private rentedsector in England increasing to 14 per cent4.Some attempts have been made to bridge thedivide between these tenures with theintroduction of intermediate or low costhome ownership options, but withcomparatively little impact. New housingsupply is dominated by private housebuilders who provide 87 per cent of newdwellings with almost all of the remainingsupply provided by housing associations5.

The housing system is intrinsically linked toalmost every major area of government policy,from the economy and taxation to the

environment and education. It is driven by ahuge range of factors from the behaviour ofindividuals to global economic forces. It iscommonly the greatest asset and debt held by ahousehold. There is wide variation in theamount of money people spend on theirhousing ranging from those who own theirproperty outright to an estimated one millionhouseholds who spend more than two-thirds oftheir income on housing costs6. The scale andcomplexity of the system means that housingpolicy has often focused on one particularcomponent part, without reference to the widercontext. At its worst, this has led to housingpolicy becoming fractured and disjointed.Addressing the housing system as a whole is nota simple task, but the first step in this process isto ask the question ‘where are we now?’

The current UK housing system isdysfunctional

Viewing housing in the UK as a completesystem leads to questions about howeffectively it fulfils the role that it plays insociety. It appears that the housing systemin the UK has significant dysfunctionalcomponents; the breadth and depth of thisare illustrated by a number of failings,including the:

� Negative impact of the housing systemon the wider UK economy;

� Increasing unaffordability of housing formany people;

� Failure of housing supply to respond tochanges in demand;


1. Where are we now?

� Unsuitability of the housing stock forcurrent and future needs;

� Failure to meet acute housing need.

The first issue that illustrates the dysfunction inthe housing system is the negative impactthat it has on the wider UK economy. Thevolatility of the housing market, which can beseen in house price fluctuations, is responsiblefor a number of these negative impacts. Therehave been four cycles of rising and falling UKhouse prices over the last 35 years7.International organisations such as theInternational Monetary Fund and theOrganisation for Economic Cooperation andDevelopment have highlighted the negativeimpact of these house price cycles on the UKeconomy8. Analysis from the Financial ServicesAuthority cites the rapid increase in house pricesduring this decade as one of a set of interrelatedeffects that led to the current crisis in the UKeconomy9. Whilst a rapid increase in house

prices followed by a subsequent correction hasbeen seen in a number of countries, othersappear to have escaped from this cycle almostentirely. Germany, for example, has seen houseprice to income ratios remain relatively stablefor the past 35 years10. In the UK, the cost ofrenting accommodation in the private sectorhas not increased as quickly as the cost ofowner occupation during the last 15 years, withrent levels remaining broadly in line withincreases in incomes (see Figure 1).

A system that tended to create lower levelsof house price volatility would provide anumber of benefits to the wider economy. Itwould improve macroeconomic stability,support economic growth and improvelabour market mobility, which would furtherimprove the flexibility and performance ofthe economy11. Significant social benefitswould also be gained by reducing thevolatility of house prices. Avoiding rapid

Where are we now?


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house price increases would improveaffordability and help avoid subsequentcrashes which lead to associated problems ofrepossessions and negative equity. Negativeequity highlights the intrinsic link betweenthe social and economic effects of houseprice volatility. From a social policyperspective it can exacerbate financialdifficulties that households might experiencedue to job loss, illness or relationshipbreakdown. From a macroeconomicperspective it can have a variety of effectsincluding dampening supply (for example byreducing labour mobility). Reductions in thevalue of mortgage assets or housing relatedsecurities can also have an adverse effect onfinancial stability due to their effect onbanks’ balance sheets13. The wider impact ofthis process of write-downs of banks’ assetshas been clearly demonstrated in the recentproblems faced by the UK and globaleconomies. This highlights the complex

interactions that exist both within thehousing system and between the housingsystem and the wider economy.

The housing system has other negative effectson the wider economy. Rising house pricesappear to be an important factor in the take upand size of pensions. Despite significant recentimprovements in pension provision, theincreasing value of housing assets is viewed bymany people as an alternative to pensionprovision. However, housing assets are unlikelyto provide a sufficient solution to the provisionof income in retirement14. The ratio of totalmortgage debt to GDP increased from 50 percent to over 80 per cent in the decade before2007. This brought increased risk to theeconomy as a whole15 because customers andsome providers “relied imprudently” on theassumption that ever-rising house prices wouldreduce the risks otherwise inherent in high loanto value mortgages16.

Where are we now?


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A second indication of dysfunctionality inthe housing system is that affordabilityhas deteriorated for many people inrecent years. On average, there has been a2.4 per cent per annum increase in houseprices for the last thirty years (seeFigure 2)19. House prices have risen almosttwice as fast as earnings since 1990 (seeFigure 1), and by 2007 mortgage costs forfirst time buyers represented, on average,34.5 per cent of individual full timeearnings; slightly higher than in 1990 atthe peak of the last housing market cycle20.Certain areas of the UK have beenparticularly badly affected, including partsof central London along with many coastaland rural areas that have attracted secondhome owners21.

Despite the recent fall in house prices, theoverall affordability of owner occupationmay still be deteriorating because lenders

are requiring much larger cash deposits,particularly for mortgages with lowerinterest rates. Potential buyers now requiresignificant wealth (as well as income) toobtain a mortgage. Improvements inaffordability due to reduced house pricesare currently being offset by constraints onthe availability of mortgage finance. Inmany areas there are also significantdifferences between rents being charged inthe private rental and social sectors. In2007, 49 per cent of younger workinghouseholds in Great Britain could not affordto buy a two or three bed dwelling in theirlocal housing market22. High levels ofdemand can make accessing social housingvery difficult with one in ten of thepopulation predicted to be on socialhousing waiting lists by 202023. It appearsthat growing numbers of the UK populationnow have their housing choices severelylimited by affordability.

Where are we now?


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The failure of housing supply to respondto changes in demand is the third symptomof a dysfunctional housing system. Housingsupply has not responded to increases inhouse prices. The total UK housing output in2005 was 233,000 units, which representedonly a marginal increase from 224,000 unitsin 1996 (see Figure 3) despite a doubling ofinflation-adjusted house prices in the sameperiod24. Figure 3 highlights the historictrends in house building where the number ofnew dwellings produced by private enterprisehas remained relatively consistent since the1960s. In 2007, the government25 outlinedthe need for 240,000 new homes to be builtevery year until 2020 in England alone, aconclusion that is broadly supported byevidence from the NHPAU whichrecommends that average annual supplyshould be between 237,800 and 290,500during the period 2008 to 203126. Themajority of this need is caused by increases in

life expectancy, the numbers of new singleperson households and changes in the patternof migration. Recent analysis suggests thatthis need has not been altered significantly bythe current economic situation27. Supply ofnew homes is failing to respond to social anddemographic change (Figure 4).

Housing supply failures can also be seen inthe types of new dwellings that have beenproduced. During the first years of thisdecade the UK had the lowest average floorarea for new dwellings of any of the countriesin the EU at the time28. This represented amajor shift towards the building of flats andsmall houses which may be linked to risingland values. In the South East the percentageof dwellings that had three bedrooms ormore fell from 70 per cent in 1997 to lessthan 40 per cent in 200629. Evidence ofparticularly rapid declines in prices of newbuild flats30, high vacancy rates and consumer

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dissatisfaction suggests that the supply of thistype of accommodation has significantlyoutstripped demand. The failure of newsupply to meet demand is linked to a broaderfailure of the housing system which forms thefourth issue.

The fourth symptom of dysfunction is thefitness of housing stock for current andfuture requirements. Responding to thechallenge of climate change will requiresignificant changes to the housing system. Atpresent, 27 per cent of CO2 emissionsproduced by the UK comes from domesticbuildings32. The Climate Change Act 2008commits the UK to reducing carbonemissions by 80 per cent by 205033.Achieving this target will require majorchanges to the existing housing stock inaddition to the government’s commitmentto ensure that all new homes are zerocarbon by 201634. Responding to climate

change will require other changes to thehousing system. One in six homes inEngland are at risk of flooding withoutsignificant improvements to preventionmeasures against floods and storm waterrunoff35. Higher and more volatile prices forenergy appear to be increasing the numberof households affected by fuel poverty, withan estimated 5.4 million householdscurrently needing to spend more than tenper cent of their income on their energybills36.

The housing system faces a seriouschallenge in responding to demographicand social changes. Increased demand forhousing is primarily being driven by anageing population (see Figure 5) and agrowth in single person households37. Inaddition to this, there are likely to be morepeople with disabilities and mental healthproblems.

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The government’s Lifetime Homes, LifetimeNeighbourhoods strategy is a significantdevelopment in this area, but morefundamental change will be required to create ahousing system that is flexible enough torespond adequately to the needs of a changingpopulation. These demographic and socialchanges are significant and unlikely to bereversed39. A more flexible housing systemwould also be able to respond both to thosechanges and also to less predictable socialchanges, such as changing patterns of migration.

Most households live in accommodation of amuch better quality than previous generations.This is partly due to the success of the DecentHomes programme in England and equivalentsin the devolved administrations in Wales,Scotland and Northern Ireland. In 2006, 71.3per cent of social housing in England reachedthe Decent Homes Standard, up from 47.4 percent a decade earlier40. Despite this progress,the programme is not yet complete and thereare still significant numbers of dwellings in theprivate rented and owner occupied sectors thatfail to meet these minimum standards (1.1and 3.7 million respectively41). Privateaccommodation also has lower spacestandards than social housing. This can resultin unused private accommodation beingunsuitable for social housing despite highlevels of demand. The UK also has muchhigher levels of deaths in winter months thanother countries in northern Europe. These highlevels of excess winter mortality appear to belinked to the quality of housing stock42. Therecent loss of life caused by a fire in a block oflocal authority flats in Camberwell hashighlighted the vital importance of acontinued focus on ensuring that basicstandards of health, safety and quality areachieved for every household.

The fifth symptom of dysfunction can be seenin the adverse social impacts of thehousing system. There are strongassociations between housing and health. Thisappears to be a multi-layered relationshipthat starts with the quality of the indoorenvironment (damp, mould, pollutants, etc.).This relationship also includes neighbourhoodeffects, such as access to green space, andbroader macro-policy level issues such ashousing allocation and tenure43. Health is justone of the outcomes that is strongly linked tohousing tenure. On a variety of measures,including health, well-being, education,employment and income, there is a greatertenure divide amongst today’s children thanany post war generation44. For example, only32 per cent of heads of household in socialhousing are in paid employment45. It is notpossible to fully understand the causal links inthese associations, particularly the impacts ofdifferent tenures, and there are hugevariations within tenures as well as betweenthem. However, it appears highly likely thatthe housing system plays a key role in thesenegative social impacts.

In addition to impacts of the individual homeon people’s quality of life, there is also a needto consider wider issues of place. Improvingsocial outcomes will almost certainly requireimprovements in the wider environment,particularly the local neighbourhood. There isevidence that residents in deprivedneighbourhoods consider social factors such aslow educational attainment and fear of crimeto be the major issues affecting their quality oflife46. This highlights the need for coordinationof policy and action across all levels ofgovernment, particularly at a time when thecurrent economic situation has had asignificant adverse effect on government action

Where are we now?


to regenerate parts of England47. SomeEuropean approaches have been successful inrenewing neighbourhoods and wider urbanareas, including Gothenburg and Rotterdam48.

Many people experience severe problems inaccessing housing, the most visible evidence ofwhich is rough sleeping. The major politicalparties in the UK agree the need to end roughsleeping but there is still significant work to bedone in achieving this goal49. Overcrowding isalso a major issue for many households, andmore than a million children are currently livingin overcrowded conditions50. There are also anumber of groups that have particulardifficulties in accessing decent accommodationincluding Gypsies and Travellers51, refugees52

and children with disabilities53. The currenteconomic situation has highlighted the problemof repossession. The Council of MortgageLenders predict that there will be 65,000repossessions in 200954. Shelter has warnedthat this could rise to 125,000 repossessions peryear by 2011 and Which? predict that 500,000households could be in mortgage arrears bythat time55. Repossession has a significant longterm impact on households and these numberswould place increased strain on social housingand other support services.

We have an historic opportunityfor change in the housing system

The current housing system in the UK hasdeveloped over decades, reflecting a range ofdifferent government policies and marketconditions. The system has become increasinglyflawed in recent years and is characterisedtoday by volatile house prices, a wideningsocial and economic divide, a need for aroundthree million new homes in England over the

next decade, and the vast majority of existinghomes being unfit to meet the environmentalchallenges facing us in the near future.

Radical change to the housing system ispossible, as evidenced by the major shifts thathave taken place during the last century.These changes include the development ofsocial housing and the associated safety nets,the post-war housing construction boom, themassive decline (and recent re-emergence) ofthe private rented sector and the massiveincrease in owner occupation.

A return to ‘business as usual’ would lead towidening inequality, increasingunaffordability and ever more unsustainablelevels of housing debt. This is not a path weshould pursue or aspire to rejoin. We nowhave a rare opportunity to respond to thechallenges posed by the dysfunction in thecurrent situation, to evaluate the role thathousing should play in society and to act todeliver changes that will improve the system.There is now a widespread recognition of theneed to address the failure of the currentsystem as a whole, rather than tinker withdifferent component parts.

This historic opportunity to change the UKhousing system has arisen with theconvergence of significant changes in thehousing system. The unprecedented changesinclude the dramatic shrinkage in mortgagelending, the near collapse and rescue in late2008 of major UK lenders accounting for 36per cent of mortgages issued and theinvestment of massive amounts of governmentfunding to shore up the financial system56.These events have occurred whilst the housingsystem is already in flux, with significantchanges now occurring in different parts of it.

Where are we now?


The private rented sector has changedextensively in the last twenty years, growing inboth absolute and relative terms. From itslowest point in 1988, it had increased by 41per cent by 2006, twice the rate of growth inowner occupied dwellings57. Thecommissioning of the Rugg Review58 into theprivate rented sector highlights the growingprofile of the sector and the need for a cleargovernment response to the changes that areoccurring within it. The review provides aclearer picture of the sector as a whole andindicates that there are now around 1.2 millionnon-resident landlords in England. At present,however, much of the policy response in thisarea focuses on how the sector functions,rather than on how the wider housing systemwill need to adapt to accommodate andcomplement a renewed private rented sector.

Social housing is also undergoing a period ofsignificant change. Its widely-perceived roleas a residual housing welfare system hascome under renewed scrutiny. Two significantreviews of social housing in England, theHills59 and Cave60 Reviews, have provideddetailed analysis of the sector. Possibly themost significant current change in the sector isa recent government review into the HousingRevenue Account subsidy system. It hasconcluded that the current system should bedismantled and replaced with one thatprovides greater independence and freedomfor local authorities to manage their ownhousing stock61. The government has alsoannounced its intention to give some supportto local authorities who wish to develop newhousing stock.

The owner occupied sector has alsoundergone major changes in the last twoyears. Annual measures of house prices have

fallen for the first time since 199362 and fellvery sharply reaching a rate of decline of17.6 per cent in the year ending February200963. There have been major reductions inthe availability of mortgage credit and areduction in the loan to value ratios that areavailable to borrowers. Mortgages thatoffered 100 per cent or more of theproperty’s value were readily available before2007 but have now almost completelydisappeared. The Financial Services Authorityis undertaking a major review of mortgagefinance that is expected to report in autumn2009 and is likely to build upon the CrosbyReview64 of mortgage finance.

In addition to changes in the three maintenures there have been a number of othergovernment reviews that suggest considerablechanges to specific areas of the housing systemincluding planning (Killian Pretty Review65),house building delivery (Callcutt Review66) andregeneration (Parkinson Review67).

The current economic situation presents asignificant threat to the housing system, butmay also provide an opportunity for change.It appears that the underlying causes of thecurrent recession are different to previousrecessions, particularly as this is the firstglobal recession since the Second World War.The International Monetary Fund suggeststhat the global economic outlook is“exceptionally uncertain”68. Short termimpacts of the current economic situation arealready being seen in reduced access tomortgage finance (both for private rentedsector landlords and owner occupiers), fallinghouse prices and increasing numbers ofrepossessions. Long-term pressures, however,may have an even greater impact on thehousing system. Changes in access to

Where are we now?


mortgage finance in the medium to long termwill have a significant effect on the wholehousing system. Increased pressure on publicspending is likely to be another importantlong-term driver of the housing system. Forexample, a reduction of net annual capitalspending from £44 billion in 2009-10 to £22billion by 2013-14 was announced in the2009 Budget69. If public spending on thehousing system is reduced it could have aconsiderable detrimental effect acrossdifferent tenures. However, it could alsoprovide the impetus required to make radicalchanges that would improve the system.

Viewed together, this combination of eventswill cause major shifts in the housing system.Without intervention these changes are likelyto increase the dysfunction in the system, butthey could also provide an opportunity tomake changes that would lead to significantimprovements. Responding to the failings ofthe housing system can, and should, form acentral part of the response to the currenteconomic situation and a wider desire forchange in the UK. Taking hold of thisopportunity will require the commitment of awide range of stakeholders and from acrossthe political spectrum.

Where are we now?


Objectives for the housing system

Current changes in the housing system andthe wider economy mean that we have aonce-in-a-generation opportunity to look atthe state of housing in the UK and begin toaddress its failures.

Participants at the Consultation accepted, asa broad direction of travel, the view ofEurope’s not for profit housing providersthat “a housing system should provide accessto decent and affordable housing for all, incommunities which are socially,economically and environmentallysustainable and where all are enabled toreach their full potential”70. Although werecognise that radical change will take adecade or more to deliver, the first steps onthe path lie in defining what it is we wishthe housing system to achieve.

A decent roof over everyone’s head

The first aim of our housing system is thateveryone should have somewhere decent tolive, without being overcrowded, having to livein squalor or in fear of eviction. The chronicshortages which lead to overcrowding willneed to be tackled. Housing options need tobe expanded to ensure greater flexibility andthe ability to move between tenures, withoutreducing existing levels of security for the mostvulnerable. Particular and immediate attentionshould be given to meeting the changinghousing needs of our ageing population.Housing in every tenure must at least meetminimum quality and safety standards.

A home fit for the future

Our responsibility to provide decent housingextends not just to the current generation, butalso to those in the future. Ensuring that bothour new and existing homes have minimalenergy requirements is an urgent priority. Thisis will be vital if we are to achieve thegovernment target of an 80 per centreduction in carbon emissions by 2050. Ourhome designs, building materials andconstruction methods have changed little inthe last 50 years and are inefficient in the useof energy, slow to build and increasingly unfitfor purpose.

Affordability and stability

A key objective of the housing system is thatthere should be a sufficient supply ofaffordable housing. Everyone should be ableto access decent housing without having tospend a disproportionate amount of theirincome. Creating a more stable housingsystem would eliminate many of the verydamaging consequences of the boom andbust cycles of rising and falling house prices.Individuals would benefit from protectionagainst problems such as repossession and thewider economy would be able to functionmore efficiently.

A decent neighbourhood to live in

Living in a decent house is not enough.The quality of the physical environment andcommunity in which you live is equallyimportant. This highlights the need to create


2. Where do we want to be?

decent neighbourhoods which areeconomically, socially and environmentallysustainable. Decent neighbourhoods need toprovide a reasonable opportunity to earn aliving and to access the wider economy. Theyneed to provide the opportunity for strong,safe communities to exist with access toeducation, healthcare and other supportservices. They need to provide theopportunity for people to respond to achanging climate, access green space andadopt sustainable lifestyles.

Recognition of housing as a system

The recent upheavals in the financial andhousing markets have clearly illustrated the needto look at the housing system as a whole. Theprovision of housing in the UK has tended tofocus on its component parts, with littleintegrated thinking about how the variouselements of the system interact. Greater attentionto the housing system as a whole could help toensure that it is delivering its main objective ofproviding decent housing for everyone.

Where do we want to be?


A serious discussion on reformingthe UK housing system

The housing system in the UK isdysfunctional, but we have an historicopportunity for change due to the majorshifts that are occurring both within thesystem and the wider economy. As thehousing system is large and complex, theproportionate response must be coherent,wide-ranging and pursued over an extendedperiod of time.

The key areas for attention outlined belowprovide an opportunity to create just such aresponse. The analysis in the earlier parts ofthis report has established a broad frameworkof problems within the housing system and avision for its potential. Within thatframework, these key areas have beenidentified as requiring detailed examination,serious discussion and, potentially,considerable change. They have beenselected in part for their breadth of scope andtheir relevance to the housing system as awhole.

The need for serious investigation anddiscussion is not an excuse for inaction in theinterim. Many important proposals forchange are relatively well developed andcould be implemented quickly. Otherproposals require further discussion andwould take a significant amount of time andresearch to develop fully. Questions exploringthe potential of a large number of policy andpractice options are detailed in the finalsection of this report, ‘improving the UK

housing system: some key questions’. Thesequestions are not designed to limit discussion,but to provide a basis for other stakeholdersto contribute their skills, experience andperspective to the debate. A coherent visionof the desired outcomes of the housingsystem, as outlined earlier in this report, mayhelp to guide the answers to the questionsoutlined in the final section.

Key areas for attention

The Consultation identified a need for furtherexamination of the housing system as awhole. Outlined below are eight key areas forattention. Examination of these eight areas,and how they work together, would form thebasis of just such a systemic review.

It is vital that all aspects of the housingsystem work towards a common goal: decenthousing for everyone in the UK. Analysis of,and changes to, different parts of the housingsystem must contribute towards this commongoal. Different aspects of the housing systemmust build into a coherent whole. Manypublic policy areas affect, and are affected by,housing; there is a need to view these areasholistically, to ensure that policies adopted inone area do not act against policy objectivesin another.

Participants from the Consultation recognisethe urgency of this situation and are going tobegin the work of developing more detailedproposals in several of the following key areasfor attention.


3. How can we get there?

1. Reforming the role of taxation in thehousing systemThe taxation system is one of the keylevers the government has to influencethe housing system through financialincentives and penalties. Taxation couldbe used more effectively to help deliverdecent housing for everyone. Thearguments relating to changes in taxationneed to be examined in detail, alongwith consideration of the widerimplications of changing the systemincluding how changes could practicallybe introduced. In-depth assessment ofthe merits of different forms of propertyor land taxation deserves particularattention.

2. Addressing house price volatilityReducing house price volatility wouldbenefit many individuals and the widereconomy. Improving housing supplywould be a key component in reducinghouse price volatility. The BarkerReview71 covered this process inconsiderable depth; that research doesnot need repeating, although progress onimplementation of the Review’srecommendations should be monitored.However, the scope of the Review meantthat it was not able to cover therelationship of housing supply to otherfactors within the housing system whichcontribute to house price volatility. Theseareas, particularly land markets andmortgage finance, warrant furtherattention. It would also be beneficial toassess the social impacts of more stablehousing markets. A taskforce that is beingco-ordinated by the Joseph RowntreeFoundation will be investigating this issuein the coming year72.

3. Retrofitting of the existing stock toreduce carbon emissionsThe government73 and many otherstakeholders74 recognise the need toimprove the existing housing stock toreduce household carbon emissionsthrough a large-scale programme ofretrofitting. Such a programme couldhave a significant role in long-termpoverty reduction by mitigating futureincreases in energy prices75 and creatingnew jobs. A number of barriers will needto be overcome if the intention for large-scale retrofitting is to be quickly turnedinto a reality. The first is identifying therange of techniques and technologies thatwill achieve the desired goals mosteffectively. These methods will then needto be rolled out on a massive scale whichwill require the development of new skillsin the workforce. Possibly the mostimportant barrier to be overcome is thedevelopment of a viable funding modelfor the programme.

4. Reviewing the effectiveness ofhousing support systemsThere will always be people who requiresupport with their housing costs,although this number should decrease ifthe housing system as a whole functionsmore effectively. The division ofgovernment housing support betweendifferent tenures should be reassessed,particularly in regard to whether income-based rather than tenure-based supportwould be more effective. A review ofhousing support would includeexamination of the role that housingbenefit plays within the housing systemand whether it should be reformed (orreplaced).



5. Increasing the range of housingproducersAt present, a large proportion of newhousing construction is carried out by asmall number of providers that areheavily dependant on one businessmodel. Increasing the range of housingproducers should increase overallsupply and help to reduce volatility inits delivery. To achieve this goal, anumber of smaller-scale deliverymodels could be actively encouraged.These could include delivery by smallerhousing associations, co-operatives,community land trusts and othermutual providers. The private rentedsector may be able to access newsources of funding, such as institutionalinvestment, to increase development,diversifying the business model ofdelivery. Local authorities could beoffered a greater role in housingdelivery through reform of the HousingRevenue Account subsidy system andthe development of finance models likelocal housing companies. Moregenerally, a review of barriers thatprevent new producers entering themarket should be undertaken.

6. Improving the flexibility of tenurestructuresThe idea of tenure flexibility has beendiscussed for a number of years. It istime to assess how a more flexible, yetreasonably secure, tenure system couldwork in practice. How could a ‘lifetimeof person and asset’ approach bedeveloped, which would reflecthouseholds’ changing housing needs anduses of their assets over the course oftheir lifetime? This would potentially

allow movement between tenures indifferent directions, building up andreleasing housing equity, either with orwithout moves between differenthomes. This could help to reduce thebarriers that currently exist betweendifferent tenures and allow people torelease part of their asset to serve otherneeds at different stages in their life.This would need to be linked to otherareas of the housing system such asRight to Buy policies and access to socialhousing.

7. Undertaking a regulatory auditA huge variety of regulation currentlyaffects the housing system. It is necessaryto understand whether regulation issupporting the provision of decenthousing or whether it is creatingunintended negative consequences. Someareas of regulation will need to bestrengthened to achieve this outcome,whilst others will need to be moderatedor removed. One area that might benefitfrom this approach is planning policy. Areplanning policies that were designedmany decades ago, such as green beltpolicies, still delivering the desiredoutcomes? How do more recent planningpolicies interact with those that arelonger established?

8. Encouraging innovationProviding decent housing andresponding to changing housing needswithin society will require innovation inall aspects of the housing systemincluding design, construction andfinance. Some potentially beneficial newideas already exist but will require supportduring their development and evaluation.



An example of this is the JESSICA model76

of funding that recycles a capitaldevelopment grant by using it to provideloans, equity or guarantees. Otherinnovation is at a very early stage and isoften found operating at a small scale.Mechanisms to support, foster and

deliver innovative approaches within theUK housing sector need to be identified.Innovative practices often also benefitfrom research and evaluation to identifytheir strengths and weaknesses,enhancing the value of any transfer of thepractice.



A large number of detailed options forimprovement of the UK housing systemwere also discussed at the Consultation. Itwas not possible to give them the in-depthexamination that each one deserved.Consequently, they have been collected inthis section as a basis for further discussionand suggestions for future changes inpolicy.

The objectives for the housing system,outlined above in the section ‘where do wewant to be?’, provide a framework that policymakers and decision takers can use torespond to the questions outlined below.Would the suggestions raised help to achievethe objectives that have been set out? Indevising detailed implementations of ideasthere is particular strength in considering theextent to which the objectives can beachieved through the use of incentives asthese are often more publicly acceptable thanmeasures of compulsion.

They are organised in the following sections:

� Finance of housing;� Increasing supply – finance and

institutional change;� Increasing supply – land, planning and

construction;� Existing housing stock;� Enhanced tenure options and

flexibility;� Creating place/neighbourhoods;� Research and the evidence base.

Finance of housing

The finance systems that underpin thehousing system have a major impact on theuse of the UK’s housing stock. These systemsinclude taxation, which can create incentivesand disincentives to certain types ofbehaviour (as well as generating revenue forcentral and local government), mortgagesthat fund home purchases, and safety nets toensure the most vulnerable in society canafford housing.

Financial systems also affect the productionand provision of housing on an institutionallevel. These impacts are addressed separatelyunder the heading, ‘increasing supply –finance and institutional change’.

Taxation

Would a property or land value taxationsystem help to subdue house price cycles?

Taxation based on property or land valuescould help to avoid house price crashes bydiscouraging the speculative purchase ofassets that causes bubbles to inflate byimposing a cost on under-utilisation.

A reduction in volatility would also serve toreduce developer risks (and consequently thereturns required) and increase the scope forinvestment in long term rental incomestreams.


4. Improving the UK housing system:some key questions

There are a variety of property and landtaxation options which may merit furtherinvestigation. Changes to the tax system may beeasier to introduce if they work with changes inthe wider economy. For example, the phasedwithdrawal of mortgage interest tax relief wasbalanced by a period of falling interest rates.

Given the unpopularity of council tax andits failings, would some form of propertytax be appealing to the public and localauthorities as a replacement?

Council tax has significant problems due toproperties not having been revalued and theregressive nature of the banding system. Anysuccessor tax must provide for having regularrevaluation (every year, or at worst every twoyears).

A restructured property tax might also achieveother policy objectives including encouragingdevelopment of unused land.

There are ways of ensuring that a possible land-or property-based taxation system receives broadsupport. It could be a revenue neutral changethat replaces existing property taxes (e.g. stampduty and council tax). In Denmark, theequivalent system allows pensioners to postponesome or all of the charge until their home is sold.

The viability of this proposal should be weighedup by a detailed commission on the issue.

Should the differences in the fiscaltreatment of different tenures be lessened?

In spite of the phasing out of mortgageinterest tax relief for owner occupiers in the

1990s, there is still variation in the treatmentof the tenures for tax purposes. For example,unlike owners who rent out property in theprivate rented sector, owner occupiers pay notax on imputed rent of their home and nocapital gains tax is paid on their principalprivate residence.

Increased equality of the fiscal treatment ofthe different tenures would encourage peopleto make objective decisions based on whichof the tenure options best suited their currentsituation, without having pressures appliedfrom the tax system. There is also a need tolook at the variations in fiscal treatment thatoccur within tenures, for example, whetherfirst-time buyers are disadvantaged comparedto existing homeowners.

Should capital gains on people’s primaryresidences be taxed in the same way asother assets?

The tax break on unearned capital gains onprimary residences creates disparitybetween the tenures, favouring owneroccupation.

A move to this type of taxation could beintroduced gradually, and hence made morepublicly acceptable, by introducing it now, ata time when house prices have recentlyfallen, with a relatively high threshold, andallowing more people to fall within the taxlater through fiscal drag (the process by whichthresholds are not increased in line withinflation, causing an automatic increase in theproportion of people falling within its reach).

The system could also be structured to allowa degree of roll-over, for example for

Improving the UK housing system: some key questions


households downsizing in retirement,whereby the tax would be paid by the estateon death.

Should inheritance tax be re-designed soas to encourage capital transfer duringlifetimes?

Inter vivos transfers (i.e. transfers made duringthe lifetime) could enable efficient use of thehousing stock if older people who have a homelarger than they need could pass some of theirhousing asset to the next generation, who mayhave more need for extra space. This wouldnot be a means of compelling older people torelinquish their larger homes but could formone aspect of a package of measures to providean incentive for them to do so. Such a packageof measures would have to include anattractive housing offer to meet their needs.

These transfers could be encouraged by givingthem favourable treatment for inheritance taxpurposes. At present, gifts of this nature wouldnormally be considered ‘Potentially ExemptTransfers’, and would only avoid incurringinheritance tax if the person making the giftsurvived seven years afterwards.

The benefits of a policy of giving favourabletaxation treatment to these types of transferswould have to be balanced against its costs.In general inheritance tax is a tax onunearned wealth for the recipient, so ispotentially fairer than other taxes; however,this may be offset by the greater good ofreducing the levels of under-occupation.

Consideration of this idea could be linked toa re-appraisal of the exemption from capitalgains tax on primary residences (see above).

Mortgage lending

Could counter-cyclical caps on mortgagelending be introduced to provide abalance of control and flexibility whilstensuring prudence?

The Financial Services Authority is currentlyreviewing the mortgage market to investigateits long term sustainability. The currenteconomic situation suggests that a moreresponsible approach to lending is required.However, introducing crude caps on ratios ofloan amount to property value (‘loan tovalue’) would potentially be damaging at atime when a lot of people are experiencingnegative equity. Counter-cyclical caps mayoffer a different solution by structuring themto have higher loan to value limits indownturns.

As there are problems with rigid limits onlending, approaches could be taken to insteadmake these caps above which certainadditional constraints on lenders apply. Itmay, for example, be beneficial to requirelenders to make additional financial provisionin relation to more risky lending, and/or toenhance the security of home buyers,effectively exposing lenders to a largerproportion of the risks of this type of lending.

Could standard limits on credit beintroduced whilst still allowing flexibility,subject to closer scrutiny?

One option would be to introduce a standardloan to income ratio limit on mortgagelending of, say, five to one. To avoidremoving flexibility where a higher loan



would genuinely be affordable, this limitcould be supported by the ability for thelender to exceed it, but only if more stringentchecks are passed and/or to require thelender to make additional provisions, asdescribed above.

Another area where limits on lending couldbe applied might be to end the abuse of self-certified mortgages. Any tightening ofregulations on these mortgage productswould need to consider their use by self-employed people, and ensure that theiraccess to a mortgage would not be undulyconstrained.

Would an increase in banks’ reserverequirements help to ensure lending ismore prudent, as well as addressing thesystemic dangers to the mortgage marketof under-capitalised institutions?

Any proposal that only ensured caps onlending for housing debt would run the riskof having harmful unintended consequences.Most other types of debt are more expensivefor the borrower, so the option of borrowingagainst a housing asset can make financialsense if, for example, it reduces the need forcredit card debt. The goal should be to dealholistically with the problems associated withexcessive credit and irresponsible lending.This may require a review of the regulatorystandards and approaches adopted bydifferent government departments andagencies including the Financial ServicesAuthority, HM Treasury and the Office for FairTrading.

A system that limited all types of borrowingcould be arranged by increasing banks’ reserve

requirements, effectively requiring banks tohave some money before they can lend it. Tominimise the impact of such a change, oneoption might be to introduce the changes withthe flow of the economic cycle, graduallyincreasing the ratio requirement in proportionto the flows of credit into the system.

The details of such a systemic change wouldrequire careful analysis as there are far-ranging implications in sectors other thanhousing of lowering the availability of credit.

Would it be better to aim forremutualisation of the Northern Rock orother government banking assets, ratherthan private sale, in due course?

Not one of the former building societies thatdemutualised following the Building SocietiesAct 1986 still exists as a successfulindependent organisation. There is someevidence that the mutual sector has beensignificantly less affected by the problems thebanks have experienced during the creditcrunch, despite a small number of buildingsocieties experiencing difficulties.

Should we pilot and evaluate debt-free orinterest-free models of housing finance?

There are several models allowing debt- orinterest-free housing finance. Pilot schemescould be established to evaluate the relativebenefits of these systems. These modelswould be particularly appealing to peoplewith religious beliefs that prohibit usury, butthey also have potential appeal to wideraudiences, and possibly have a beneficialimpact on the type of housing constructed.



One model of debt-free housing financeinvolves the finance company and the‘owner’ each buying equity shares in aproperty, with the owner allowed to purchasemore of the property over time.

Another option would be for an agency ofthe state to issue interest-free debt forhousing purchases.

The Swedish JAK Members’ Bank providesanother model that could form the basis ofan interest-free financing system in the UK.Members of the bank have to save anequivalent amount of money to the cost oftheir mortgage for an equivalent period,either before or after they hold the loan,measured through a system of points. Thereare also parallels with the UK’s formerterminating building societies, which weredesigned to support a group of people intohomeownership and be wound up when allmembers had a house.

Reform of safety nets

Would it be beneficial to reform housingbenefit into a unitary system applyingacross all tenures?

At present the financial support withhousing costs that is available variesaccording to tenure. Specifically, housingbenefit is only available to tenants, not toowner occupiers who find themselvesunable to afford their housing costs. Theequivalent benefit for owner occupiers isSupport for Mortgage Interest (SMI). SMIcan normally only be claimed after waiting39 weeks, although this has beentemporarily reduced to 13 weeks; it only

covers the interest component of therepayments and is only available on loans ofup to £200,000. This one national limit onSMI is also inconsistent with the local andvariable limits on housing benefit payments.In the past there has no time limit onpayment of SMI as long as the claimantqualifies on income grounds. Howeverrecent changes to regulations mean thatpeople making a new claim for jobseekersallowance from January 2009 face a twoyear limit on entitlement to SMI.

Whilst any policy to provide an additionalsafety net comes at a cost, in analysing theviability of the policy these costs must beoffset against the social impact of evictionand the financial help that is ultimatelyneeded to get people into a new home.

A needs-related housing allowance, operatedindependent of tenure, could act to createfairness between the tenures. It might ensurethat less affluent householders, whether theyare tenants or owners, would be entitled tofinancial help with their housing costs. Suchan allowance could be related to the incomeof the household, the size of accommodationrequired and the geographical variation inhousing costs. Additional allowance could bemade if anyone in the household requiresmore expensive housing due to age ordisability.

Should housing benefit be restructured toensure it does not create workdisincentives?

It appears that housing benefit does notfunction effectively as an in-work benefit.Those who are out of work but have the



opportunity of taking up some casual orinsecure work should not be deterred fromdoing so by a sudden reduction in theirhousing benefit entitlement. There is aparticular need to simplify the links betweenhousing benefit and tax credits.

One further potential amendment would beto fix eligibility for six months with noretrospective claw back (except incircumstances such as fraudulent claims); thiswould provide a greater incentive to workand reduce the reporting burden for peoplein casual work whose income (and thereforebenefit entitlement) can change on a weeklybasis.

Could properties repossessed by mortgagelenders be considered for conversion tosocial rent, allowing residents to stay intheir homes as tenants?

Creating a presumption that therepossession of a property would trigger anassessment of the possibility of a sociallandlord taking over ownership of the housemight allow some former owners to remainin their property as tenants. As well asreducing the social cost of evicting familiesfrom their homes there would also befinancial benefits due to the authorities nothaving to re-house them. In somecircumstances it may be appropriate to offera shared ownership option as well asoutright social renting.

The landlord could be the local authority if itis still stock-holding, or perhaps the Homesand Communities Agency, who might wish tocontract the management to a housingassociation.

Care would need to be taken in the design ofsuch a scheme that it did not automaticallyparachute all failed homeowners into a securesocial housing tenancy when others mighthave waited on a landlord’s housing registerfor an extended period.

These measures could build on thegovernment’s Mortgage Rescue Scheme,announced in the 2009 Budget, which aimsto help 6000 households over two years77.

There is also a case for reviewing theoperation of the pre-action protocol, with aview to including more rigorous and specificrequirements for lenders to exerciseforbearance (i.e. in terms of periods ofinterest only mortgage payments or paymentholidays) so that there is a clearer standard bywhich to judge that repossession is only beingexercised as a last resort.

Other countries have different methods ofreducing the risks associated withmortgages. In The Netherlands there is aNational Mortgage Guarantee scheme that,for a small upfront fee, underwrites anynegative equity if the owner is forced to sellthe property78.

Can provision of tenure-neutral housingadvice be increased to ensure assistance isavailable irrespective of tenure?

Many providers of housing advice believethat recent changes to legal services contractshave had an impact on the level of housingadvice available. This has occurred at a timewhen it is needed most, as more householdsexperience difficulties related to thedownturn.



Housing advice could be enhanced to providetenure-neutral assistance that would beavailable not just at times of crisis, but toanyone considering their housing options.

Increasing supply – finance andinstitutional change

There are constraints on both public andprivate sources of finance at present: theavailability of credit from mainstream banks,heavily dependent on international flows ofcapital, has been severely reduced in theglobal credit crunch. Public expenditure hasbeen increased in response to this creditcrunch and the resulting recession. Taxreceipts have also fallen due to the recession,leading to an increase in public borrowing. Asthere seems to be only limited appetite forthe state to increase money supply, allpolitical parties are projecting a need forsome combination of increased tax receiptsand/or expenditure constraints to reduce theborrowing at some point (although the natureand timing of these are matters for intensepolitical debate).This financial constraint hashad a dramatic impact on the supply ofhousing in the UK: completion of newdwellings in 2009 may fall to the lowestlevels recorded since the end of the SecondWorld War.

The current economic situation highlights thedangers of relying too heavily on a limitednumber of financial sources for thedevelopment of housing. A more diversefinance supply system would provide greateropportunities for investment to continuedevelopment. Over time, developing a rangeof sources of finance for the development ofhousing could produce a buffer to mitigate

the cycles that affect particular types ofinvestment in housing. There is particularneed to ensure continuing investment in thedelivery of affordable housing in light of thecurrent financial constraints, and theincreased demand the sector is likely toexperience.

Could support to housing associations beprovided to help increase the supply ofaffordable housing?

Housing associations typically adopt cautiousapproaches to investment in the delivery ofhousing. Encouraging them to adopt a lessrisk-averse strategy might increase thedelivery of housing. This type of changemight require different types of support forhousing associations. The Homes andCommunities Agency or Tenant ServicesAuthority may be able to play a greater rolein supporting housing associations indeveloping new sources of funding andutilising their existing assets. Housingassociations’ attitudes could also beinfluenced through changes to the regulatoryregime.

Whilst these changes should not seek toencourage excessive risk-taking, a balancecould be sought that would encourage areasonable level of bolder moves. If thiswere to happen it should be acknowledgedin advance that a proportion of risky moveswill fail, and that this failure would not beunduly penalised, perhaps including asystem where a risk could be sanctioned inadvance by the regulator. The system would,of course, also have to ensure that existingtenants were not put at risk by theirlandlord taking part in these activities. Care



would need to be taken not to injectexcessive risk into the system through anychange of this nature.

Are there ways in which better value formoney could be achieved by directingsome of the housing benefit budgettowards capital subsidy for new housingstock?

If fully effective, capital subsidy would‘correct’ market failure, making housingaffordable for everyone without the need forongoing revenue subsidies like housingbenefit. In contrast, the effect of a revenuesubsidy is to enable people to survive withina market where prices may be constantlyincreasing. Rethinking the balance betweencapital and revenue subsidies could havesignificant long term benefits both for publicfinances and individual households. This longterm benefit might be maximised by utilisingmodels of investment that recycle the initialcapital subsidy like community land trusts orJESSICA funds (see below).

Part of any consideration over the level ofcapital subsidy to be provided for housingconstruction would need to be the level ofreduction in revenue subsidies, such ashousing benefit, that could be expected tofollow.

Could a relatively small investment offinance be made to achieve beyond itsmeans by ring-fencing it and revolving it?

Creative alternatives to upfront capitalsubsidy could be considered to ensure thatfinancial investments are utilised fully. An

idea that is currently being explored is thecreation of JESSICA funds79. European Unionfunding rules mean that RegionalDevelopment Agencies can use some of theirstructural fund allocations to create an urbandevelopment fund. This JESSICA fund can beused to provide equity, loans or guarantees.Funds can then be recycled over time as thereceipts from equity and loans are realised.The basic idea that underpins this financemodel could be replicated by otherstakeholders.

Could supply be increased and diversifiedby supporting local authorities in thedevelopment of new housing stock?

Volume house builders are currently limitedin their level of development due tosignificant decreases in land values. Thesedecreases mean that many developments areno longer commercially viable. There has alsobeen a move towards government support foronly a limited number of preferreddeveloping housing associations (which maynot be able to develop if their finances areconstrained). One response to this situation isthat local authorities may become significantplayers in housing development again.

Experience has demonstrated the potentialpitfalls associated with creating large mono-tenure council estates. Encouragingdevelopment by local authorities does notnecessarily imply a return to this type ofdevelopment. Local authorities could play anumber of different roles in the developmentprocess. This might include development inpartnership with other stakeholders withsome of the stock to be used in the privaterented or owner occupied sectors.



Could the level of housing developmentbe increased by changing the UK’s publicaccounting rules to a ‘general governmentfinancial deficit’ (GGFD) basis?

The UK currently adopts public sector netcash requirement (PSNCR) accounting rules(previously known as the public sector bor-rowing requirement, or PSBR). This methodof accounting classifies any borrowing bylocal authorities as public and therefore sub-ject to treasury limits. Consequently the levelof development is constrained by limitationsplaced on the acceptable level of nationaldebt. This is not the case for housing associa-tions that develop new housing.

The government could change the publicaccounting rules to adopt the GGFD rulesfollowed by other European Union countries,which classify local authority borrowing fortrading activities like housing as private. Localauthority housing represents a large (andlargely unencumbered) asset that could beused as collateral for this kind of borrowing.

Should institutional buffers againstcyclical variability be introduced?

The impact of the current economic cycle onsection 106 contributions from developers isone indication that there is a need for acounter-cyclical investment mechanism orbuffer. Section 106 contributions have provideda significant proportion of social rented housingdelivery over recent years, in addition to otherbenefits like infrastructure and communitybuildings. However, these are inherently tied tocycles in private sector housing construction:when the rate of construction falls so do therates of social housing development.

A mechanism that served to deliver morehousing when levels of private constructionfell would also be beneficial for theconstruction industry, ensuring skilled workerswere not lost.

There are a number of models that could bepursued to create buffers against economiccycles. One example would be a revolving fundfor re-investment, whereby an institutionalstructure was devised that would sell propertyin booms, responding to market signals ofdemand, and buy land and property duringmarket falls; this should act to moderate bothrises and falls in the market, making theireffects less severe. The institutional structurecould also ensure sustained delivery byadjusting its building rates counter-cyclically tothe general levels of construction.

What steps are necessary to makeinvestment in residential property anappealing investment for pension fundsand other institutional investors?

Pension funds and similar institutional investorshave long been cited as a potential source ofinvestment in housing. Encouraging funds toinvest in housing is dependent on whether itcan be made an appealing investment. TheHomes and Communities Agency is attemptingto achieve this through its Private Rented SectorInitiative. Aviva is the first company to show aclear interest in this idea with theannouncement of a plan to develop a £1 billioninvestment fund. Lessons and recommendationsthat emerge from this initiative should becarefully considered to ensure that this possiblesource of investment is fully utilised. A packageof measures to support this type of investmentmight be relevant which could, for example,



include a guaranteed period of limited losses atthe start of a scheme.

Ways of modifying the risk profile ofinstitutional investment in the private rentedsector might include creating tailoredportfolios such as older persons’ housing orthrough generating better information on longterm rental returns in the sector. The taxationissues surrounding this type of investment mayalso benefit from further analysis.

If the initiative proves to be successful, localauthority pension schemes could beencouraged to consider investing a proportionof their funds in local housing projects. Thishas the potential to create a beneficial spiral ofincreased development and work in the localarea, improving local housing with anenhanced local authority area.

Institutional investment may provide a methodof increasing investment in housing but it maynot necessarily improve levels of tenantsatisfaction80. Financial incentives directedtowards the private rented sector shouldinclude a focus on improving quality in thesector (for example improvement of energyefficiency, meeting the Decent Homes Standardor provision of more secure tenancies).

Should intermediaries be created to marryinstitutional investors to property stockand management services?

Big institutions require large asset pools toinvest in. They either do not have the skills toundertake property management or do notwant to fulfil this role. Housing associationscould play a role in this, providing theirmanagement skills and systems for a fee, and

consolidating projects into large enoughgroups of properties that they would beattractive for institutional investment.

Can housing bonds be created that attractpeople to invest their savings in thecommunity?

Government, either national or local, could sellhousing bonds to pay for the requiredinvestment in housing. Individuals andinstitutional investors would be able to investin the bonds and investment could beencouraged by giving the bonds a favourabletaxation treatment. Housing bonds have thepotential to act as a mechanism to reconnectthe housing finance system with localcommunities. Housing bonds might appeal tothose releasing equity by down-trading whowish to retain an exposure to the propertymarket, or to people with a long term interestin the supply of affordable housing such asparents investing money from child trust funds.This type of bond may begin to developthrough the Homes and CommunitiesAgencies’ Private Rented Sector Initiative.

As well as public sector bonds, there may alsobe potential for not-for-profit housingorganisations to issue bonds to fundinvestment in securing a long-term incomefrom enduring housing assets.

Could central government provision ofrevenue deficit guarantees achievegreater levels of development than capitalsubsidies alone?

Revenue deficit guarantees are a way ofencouraging development by providing a



guarantee to the developer that they willreceive a certain level of income for a periodof time. By removing part of the financial riskassociated with development, the level ofreturn that would be needed to consider adevelopment viable would be decreased.Consequently more projects would bedesirable for development at a given level ofcapital subsidy (or in situations where nocapital subsidy is available).

The guarantees could be used in similarsituations to capital subsidies, for example, inthe provision of affordable housing. It wouldbe important to ensure that the benefits ofgreater development outweighed the increasein risk that would be taken on by the publicsector.

Could a National Housing InvestmentBank be developed to encourageadditional investment in housing?

In 1992 the Royal Institution of CharteredSurveyors called for a National HousingInvestment Bank to be established to attractinvestment funds and provide loans tobuilders for the construction of low-costhousing81. The idea has been adopted inother countries and is once again worthy ofconsideration in the UK.

Could a more varied mortgage market becreated to decrease reliance oninternational finance?

One of the underlying reasons why the creditcrunch affected the UK was the banks’reliance on international finance to be able tolend. A reduced reliance on this would mean

that more of the lending would be financedby savings/investments from within the UK.

Local authorities (through dropping the publicsector net borrowing requirement), mutualfinancial organisations and housingassociations could have roles in such asystem.

An approach involving local authorities inproviding banking services might provide ameans of accessing finance for thedevelopment of affordable housing. Localauthority banks could be established byworking in association with existing financialorganisations; any such links would have tobe made with banks or building societiescarefully chosen for their suitability, includinga strong and viable organisation withoutexcessive exposure to risky areas of financeand showing a commitment to investment inthe location.

Small mutual financial organisations, linked tothe communities they serve, have potential tocreate a diversity of supply. In Germany, thepresence of the BVR co-operative bank hascontributed to diversity of sources of finance.It is a large bank with 30 million customersbut it has a particular focus on small andmedium sized enterprises that are supportedthrough strong local networks.

Should a national guarantee fund forhousing development be established?

National guarantee funds provide protectionfor those investing in certain areas byguaranteeing against losses they might incurin relation to the project. This acts in place ofcollateral requirements, encouraging financial



institutions to lend where it might have beenreluctant to otherwise. There is the potentialfor high leverage of government funds,resulting in the use of private funds for fargreater investment than the governmentfunds alone would afford.

The fund’s eligibility criteria could be definedto specifically target affordable housingproviders. As this sector is low risk the defaultrate would be likely to be close to zero,allowing further recycling of the guaranteedfunds in the future. Such a fund could bedesigned to be of particular benefit to smallerhousing associations. This step may need tobe taken in association with a change to thegovernment’s accounting rules to avoidplacing all housing association debts on thepublic books.

Could tax increment finance schemes(TIFs) provide a new source of finance forlocal authorities?

TIFs are a funding mechanism used in theUSA to allow local authorities to borrowmoney against future increases in taxrevenue. The 2009 Budget contained the firststeps towards development of TIFs with thechancellor inviting local authorities to submitproposals on how they might use them. Anumber of local authorities have expressed aninterest in the scheme. The All Party UrbanDevelopment Group has assessed the widerimplications of TIFs and recommended thatthe Homes and Communities Agency leadwork on their development.

The viability of TIFs could be affected bywhether they would be classified as publicborrowing. As currently proposed, under

existing government accounting rules, theywould be classified as such, and hence besubject to Treasury limits. Changes to thedetails of their proposed implementationand/or the accounting rules could affect this.

Should we avoid creating a reliance oninstitutions that are ‘too big to fail’ acrossthe housing sector?

The recent credit crisis has highlighted thenotion of organisations that are considered‘too big to fail’ due to the impact theircollapse would have on wider society. Thisterm may also be applicable to someorganisations in the housing system, includingsome housing associations and developers.

The homebuilding industry in the UK hasbecome more concentrated into the hands ofa small number of large builders; it issignificantly more concentrated than, forexample, in Australia and the USA.

Similarly, the Homes and CommunitiesAgency, and the Housing Corporation beforeit, favoured development being entrusted toa limited selection of developing housingassociations, representing a small fraction ofthe total number of registered housingassociations.

Could existing marginal structures bemainstreamed to bring their benefits to awider pool of potential residents?

A number of alternative housing modelsalready exist in the UK or play a significantrole in the housing systems of other countries.These may be able to play a more substantial



role if they are given the right type of supportor have barriers to their developmentremoved. These models include:

� Sweat equity, where people contributetheir time and effort towards providingtheir own housing instead of financialequity;

� Community land trusts, that seek toprovide long term affordable housing fora particular community;

� Self build, where individuals take aleading role in the design and/or buildingof their housing;

� Housing co-operatives, which jointlyown and democratically manage housingstock.

These housing models, and others like them,account for only a fraction of the housingstock in the UK unlike some other countries inEurope or North America where they aremuch larger. However, many other potentialresidents in the UK may be attracted by theopportunity to develop long-term affordablehousing in sustainable local communities.Building up the necessary social and financialcapital to develop these types of modelstends to take significant amounts of time andeffort. This means that they are unlikely tocontribute large amounts of new stock in thenear future. In the past this has often led tothese models being marginalised andinstitutional barriers have made it difficult forthem to increase.

The Commission on Co-operative and MutualHousing represents one example of work thatis currently being undertaken to investigatehow institutional and practical support can beprovided to help address the barriers thatthey currently face. It is important to ensure

that those developing housing usinginnovative models can access finance. It maybe appropriate for special lines of credit to bemade available for cooperative and self-helphousing, which occurs in other countries, forexample through the German Federal Bank.

Should an agency be established toactively promote experiments andinnovation in housing design, constructionmethods and delivery?

Other countries more actively promote andencourage innovation in their housing system.The UK might benefit from a wide range ofinnovation across the housing system.Organisations that are currently involved insupporting innovation, like the BuildingResearch Establishment, could be supportedfurther whilst the role that organisations likethe Tenant Services Authority and Homes andCommunities Agency play in innovation couldbe clarified.

The Netherlands has an agency that isdesigned to encourage experimentation inhousing delivery called the SEV (StuurgroepExperimenten Volkshuisvesting) or ‘SteeringCommittee for Experiments in Housing’. SEVhas actively encouraged ‘bottom up’experiments that are built on localexperience, rather than just the experience oflarge organisations. These individuals andsmall groups provide many of the mostinnovative ideas.

Conducting experiments of this nature alsoprovides an opportunity to conduct research.Research strands can be included inexperimental housing projects, to evaluatesuccess and learn lessons.



For such an agency to be able to adequatelyattempt experiments it must be supported byan explicit understanding and acceptance thatnot all the experiments will work, but thatsome will produce new ideas that can befurther developed or implemented elsewhere.

Could legislation be adopted that wouldallow national regulations to be set asideto undertake experimental projects inhousing?

At present, many pilot schemes andinnovative ideas that are to be tried outneed primary legislation to set aside thestandard rules. This inflexible approach canhinder innovation. Were a general abilityintroduced for a broad range of housing-and planning-related rules to be set aside forexperiments, more innovative ideas could beattempted. For example, this might be thetemporary local suspension of section 106payments to allow an experimental housingproject that would not otherwise befinancially viable.

In the Netherlands the SEV (see above) isable to take on this kind of role. Giving suchan agency these powers could support it inpromoting innovation.

Would a stronger public sector role inhousing supply provide balance to themarket?

At present there is a very one-sided tenuresystem, with a large proportion of people inowner occupation or aspiring to owneroccupation. This feeds a one-sided supplysystem, with the majority of construction

occurring in the private sector. A morebalanced mix of tenure could help to delivera more balanced supply side, and vice versa.

The public sector, particularly localauthorities, could take a more proactive viewof deciding what stock needs to be built andthen managing the process of building it. Thatwould not inevitably mean that the publicsector would have to retain ownership of itand let it as social rented housing for the longterm – it could be sold into the privatemarket for owner occupation or privaterental.

This form of delivery could be combined withenhanced use of compulsory purchase powersto ensure that the profile of stock suppliedwas also in the correct locations.

Could supply be increased and diversifiedby supporting smaller housingassociations to develop?

The Homes and Communities Agency hasselected some housing associations to becomepreferred development partners,commissioning them to develop newaccommodation. This has the benefit ofimproving the delivery of larger projects.However, it may be worth reviewing the rolethat smaller housing associations can play inthe delivery of new housing. They might beable to bring new assets, both land andcapital, that may be beneficial in the deliveryof smaller developments.

These smaller housing associations may alsobe able to add to diversity in supply byproviding affordable housing in a broaderrange of locations and responding to the



polarisation within existing neighbourhoods.They may also be able to take on animportant role in retrofitting existing stock.

Would targets better serve the needs forsupply if the standard unit ofmeasurement was something other than adwelling?

At present build and cost targets are typicallyexpressed as a number of dwellings. Whengovernment announces, for example, that it ismaking a specific amount of money availablefor a particular project, the number ofdwellings this is expected to deliver is alsousually stated. Alternative units would includethe number of habitable square metres or thenumber of additional bedrooms to bedelivered.

This approach could be adopted across awide range of programmes, irrespective ofwhether it is specifying the development ofnew homes or the buying up of existingstock from the private sector. Relevanttargets include national density targets,delivery targets for each region/localauthority area and targets for the amount ofhousing to be delivered through grantschemes such as the social housing deliverygrant.

Expressing delivery targets as a number ofdwellings tends to encourage the delivery ofone- and two-bedroom homes. This may notmeet housing needs in many areas. Forexample, if government requirementschanged from 50,000 new social-rentedhomes being delivered with a particular pieceof funding to 150,000 new bedrooms insocial-rented homes, it would allow social

housing providers greater flexibility intailoring their housing provision to meet theneeds of the community.

To avoid introducing new perverse incentivesthrough this move, for example a move frompressure to build dwellings with a smallnumber of bedrooms to dwellings with smallbedrooms, it might be necessary to create ameasure that featured both size and numberof bedrooms. A crude example of this wouldbe ‘number of bedrooms of not less than 10square metres’, although a more advancedmodel might need to feature the space of thedwelling as a whole.

There may also be a justification for reviewingspace standards more generally, including inthe private sector where unsold newly-builtproperties are often unsuitable for purchaseby social landlords due to their size.

Should the culture of housing provision bealtered to help create a system thatfocuses on delivering sufficient housingrather than particular tenures?

Whilst the relative advantages anddisadvantages of different tenures in thecurrent UK housing system mean that thetenure under which a property is occupied isnot irrelevant, there is a case for consideringwhether the net supply of stock is moreimportant.

This would be particularly the case if thesystem were better able to respond to tenureneeds through movement of a proportion ofthe stock between tenures and if some of theinequalities between tenures could bereduced.



Increasing supply – land, planningand construction

The present business model of theconstruction industry has led to a situationwhere a small number of firms and otherproviders are responsible for the supply of asignificant proportion of new housing stock.The weaknesses of this situation have beenhighlighted by the current economic crisiswhere housing supply has fallen to the lowestlevels since the Second World War.

A more sustainable supply economy wouldfeature a diverse mix of providers, withdifferent providers building for differentmarkets, based on different models, differentfinancing structures and with differentownership options. How can we encourage adiversity of housing supply? Alongside lesswell-known types of organisations that mightdeliver housing, the possibility for more smallbuilders to compete with the volume homebuilders would diversify supply and couldhave a positive impact on the visual characterof housing. With pressures on finances thereis a need to examine the viability of projectson a case-by-case basis according to localconditions. Lots of small pockets of deliverycan add up to assist in meeting the largeneeds.

Government will have a role to play inencouraging a range of different methods ofhousing provision to develop, part of whichneeds to be low cost housing. Ensuring theprovision of low cost, good quality housingis one way of alleviating the damagingeffects of house price volatility. A variety ofsuppliers are also more likely to be able tomeet the changing environmental and socialneeds.

Should site-specific planning decisions bebased on a rational analysis of the costsand benefits of allowing development ona site, rather than focusing on its priordesignation?

Almost any proposed development of a pieceof land will come with both benefits andcosts attached. A fully rational system wouldseek to weigh these up and permitdevelopment where the benefits outweighthe costs, ideally favouring those sites wherethe balance is most strongly in favour of thebenefits, ahead of those where theassessment is more marginal.

Under the present plan-led system, a site’sdesignation in a spatial plan is itself amaterial consideration as to whether planningpermission should be granted on that site.Removing that system would allow abalanced consideration of the costs andbenefits in each case; the justification for notdeveloping the land would have to stand onits own merit.

Care would be needed in the design of thistype of system to ensure that such acost/benefit analysis included an assessmentof the viability of serving the site with theinfrastructure necessary to supportsustainable communities. Sites that wouldentail a structural commitment to highusage of private transport (and the carbonemissions associated with such usage) wouldneed to be marked down accordingly. At atime when international and nationalpolicies place great weight on producinglower carbon homes and communities,housing policies that could inadvertentlyincrease carbon emissions should beavoided.



Potential disadvantages of this change to thesystem include the reduced certainty over land usethat potential investors might have. An alternativemodel might include a plan element, but that theplan should be very strongly grounded inevidence and almost continuously reviewed torespond to changes in the evidence base.

Could the social costs associated withdevelopment be offset by a tariff?

If there is a social cost associated with adevelopment in the countryside, for example,a tariff could be paid to the local authority bythe developer; the local authority coulddistribute the money received to compensatefor losses, including loss of amenity.

Other losses could include significantreductions in access to or increased costs inaccessing infrastructure. They could alsoinclude raised energy costs and carbonemissions. It may be sensible to include a cut-off point at which a tariff cannot be used tomanage the intrinsic lack of spatialsustainability of a development site.

Should land buffers be established toimprove responsiveness to need?

Land buffers might be considered whereadditional development could be quicklypermitted if extra need arises within the area.This would potentially allow for land to bebrought into use relatively rapidly as marketconditions change. The Barker Reviewoutlined the benefits of this approach ingreater detail and it should already form apart of a well-managed approach to housingin a development plan82.

Could housing policy objectives, includingan increase in supply, be supported byupdating green belt policy, withoutcreating disproportionate harm to thecountryside?

It may be time to re-examine the role of greenbelts and take a more holistic view of urbanfootprints. Green space in towns and cities isimportant to the social and environmentalsustainability of urban areas; there is evidencethat people value it more highly than greenspace in the countryside. Yet planning policiesare more likely to protect countryside greenspace than precious urban green areas.

By allowing development on green spaceoutside of cities (potentially including theinner edge of that currently designated asgreen belt), to be offset by the creation of anequivalent amount of green space within thecity limits, housing could be delivered whereit is most desired without creating a netreduction in the amount of green space.

Green belt policy should also be reviewed inlight of the fact that many people nowcommute over green belts, with the resultthat desirable sustainable development policyobjectives of reducing travelling can actuallybe hindered by the policy rather than helped.

Should a closer relationship between theplanning process and infrastructure policyand provision be developed?

Housing development does not exist inisolation; without appropriate infrastructureprovision even the most well thought outdevelopment will fall short of its ability toachieve sustainable outcomes.



By strengthening links for two-way interactionbetween infrastructure policy and the housingplanning system there may be an opportunityto ensure that the two properly complementeach other. Local Development Frameworksand Regional Spatial Strategies seek toprovide these links, but can be slow todevelop.

Should tenure targets be replaced with aneffective housing system in which thetenure of properties entering the supplymeet needs?

The housing system needs to be able torespond to a variety of factors that canchange, including demographic change. Thesupply-side response to demand could comeboth from new-build properties and increasedtenure flexibility for existing stock.

It is easy for a property to move betweentenures in certain directions (for examplefrom owner occupation to private rented),but less so in others (for example from owneroccupation to social renting). This systemicinflexibility makes it hard for tenure balancesto adjust to changes in need or demand.

Could supply be increased by reducingregulation on the re-development ofpreviously developed land?

Previously developed land sitting idle inurban areas represents a valuable resource,with potential to provide a source ofdevelopment land, reducing the need tobuild on new sites. However, regulation canprevent development if it requires siterehabilitation that is disproportionate to the

risk associated with the previous use.However this must be balanced against thehealth risks associated with developing onsites that have not been properlyrehabilitated.

Could delivery be improved by providingclarity in advance to potential developersof sites over the requirements for eachsite?

At present potential developers often do notknow the level of section 106 contributionsthey will be required to make on a site, northe density that they will be able to achieve.This can result in land being purchased by thebidder that thinks they can squeeze the mostunits onto the site and negotiate the lowestsection 106 contribution. Some localplanning authorities have dealt with thisproblem by preparing supplementaryplanning documents that make clear the levelof contribution sought. The CommunityInfrastructure Levy (CIL) legislated for in thePlanning Act 2008 holds out the potential toenable systematised levy contributions.

Would adding VAT to new build housingprovide a means of capturing planninggain and paying for infrastructure?VAT is already charged on extensions andrefurbishment of existing properties.Campaigners against empty homes haveargued the playing field should be levelled byremoving VAT from refurbishment. Analternative would be to achieve equality inthe VAT rates by charging VAT on new buildtoo. This could be an easier charge to levythan the community infrastructure levy (CIL)or planning gain supplement (PGS).



One factor that should be taken into accountin examining the consequences of any changeof this nature is the variation in the impactbetween regions.

Could the quantity and quality of newhousing stock be increased by increasingthe level of industrialised processes used?

Construction methods in the UK are verysimilar to those that were in use 50 yearsago. Modern Methods of Construction(MMC) play a significant role in constructionin the housing systems of other countries.MMC encompass a broad range ofapproaches, but would typically involve theproduction of some house parts off site. Thiscould include ready-made parts like wallsand roofs or entire rooms. The proposedbenefits of MMC include faster constructionand greater energy efficiency whilst usingless onsite labour.

An important factor in increasing theadoption of MMC may be educating peopleabout the benefits of these techniques. Newconstruction methods will require training forconstruction staff, but also demonstration tothe public of the benefit of these methods toensure the end result is acceptable topotential purchasers and occupiers.

Should more be done to develop the skill-set of the construction workforce to meetthe challenges of the future?

New challenges face the UK and differentconstruction techniques might be able to playtheir part in responding to those challenges.For any construction technique to be viable

for widespread use there needs to be aworkforce with the correct skills to developwith it.

Could the quality of housing produced beimproved by reducing reliance on thecurrent trader model of house building?

The Calcutt Review described the businessmodel adopted by home builders in the UKas the ‘current trader’ model. Under themodel builders do not take a long terminterest in the development: homes are built,sold, and the builder moves on.

An alternative model might see buildersadopting a longer-term commitment todevelopments which could result in higher-quality homes. Such a model might featuredevelopers involved in renting part of thestock and consequently holding an ownershipstake in sites for a longer term.

Could more land be brought intoproductive use through a concertedprogramme of compulsory purchases?

A concerted programme of compulsorypurchase orders (CPOs) on land (potentiallywith planning consents in place) currentlyheld in private land banks could allow it tobe bought for a fair value that would allowmaximum levels of development. The publicsector would have a number of potentialoptions for the land, including releasing itimmediately to stimulate delivery or holdingit as a long term asset, to be released duringmarket rises to lessen the affordabilityimpacts of the boom. A combinationapproach could also be taken, where the land



is developed immediately, creating housingsupply, but the public body retains an interestin the land, creating a longer-term publicasset. The role of the public sector in thiscould be to obtain the maximum socialbenefits from holding land for the long term,rather than seeking to extract maximumprofits from speculative increases.

This could also be a mechanism for checkingthat the value of land stated on housebuilders’ balance sheets accurately reflects itsreal value in the current market, allowingbusinesses and investors to make rationaldecisions based on accurate valuations.

Local authorities and the Homes andCommunities Agency have CPO powers so aprogramme could be conducted at a locallevel or across a wider area.

Could the public sector take a role insupporting a mixed economy of housingprovision?

The public sector, including local authorities,may be able to take on a more active role inmasterplanning. This might be achieved bytheir assembling land for development,investing upfront in infrastructure, anddividing it into parcels for development by arange of providers. This process could be usedboth to increase the build out rate and tointroduce a diversity of types of providers.Build out rates would be enhanced bybringing a larger number of mainstreamdevelopers onto large sites. Diversity could beincreased by allocating a proportion (say 10per cent) of each large site for developmentby co-operatives or self builders, althoughthis would require coordination to ensure that

the development of infrastructure wasproperly managed.

Could steps be taken to ensure it isfeasible for local authorities to release landthey hold for development at no cost?

In some cases the donation of a piece of landowned by a local authority could act as the‘subsidy’ that makes a development projectviable. Local authorities can be legallyconstrained from such an act by a requirementto obtain best value or best considerationwhen disposing of assets. It should be easierfor them to take a broader view of what is forthe good of the area, including being able todispose of land for no (or greatly reduced)value if it will produce a benefit throughproviding much-needed housing.

It may be necessary to provide incentives tolocal authorities to supply their land in thisfashion. In any event, care would be neededto ensure that such a system did notincentivise housing development on land thatwas poorly located and unable to provide asustainable portfolio of services/infrastructure.

In the medium and long term, as the stock ofavailable public land is used up, localauthorities may need to switch their emphasistowards public land assembly.

Could supply innovation be enhanced bycreating more effective opportunities forconsumer voices to be expressed?

There is a general need for timely innovation inthe UK housing system. Lifestyles have changedrapidly, requiring new housing arrangements;



the environmental challenges we face demandswift action to address them. Meanwhilehousing and house-building models havechanged little in 50 years or more. Newapproaches are required across the system: newapproaches to design, new approaches to costcontrol, new approaches to construction.

In finding out what people need there couldbe a role for more sophisticated techniques toelicit consumer voices and to communicateback to consumers.

Could an offer be devised that wouldmake living in flats attractive?

In the UK, unlike in many parts of Europe,very few people report a desire to live in aflat. The historically poor quality of flatsprovided in the UK has almost certainlycontributed to people’s beliefs that a house isalways a better option. This has beenexacerbated by the recent oversupply of flatsin some cities in the UK. Flats, however,potentially represent an environmentally andfinancially sustainable way of living; theypermit relatively high densities, reducing theneed for land to be developed, and can becheaper to build and run than a housedeveloped on the same land.

A focus on the types of design and buildingtechniques that are used to supply flats couldhelp to create an offer that would be genuinelyappealing. Other components of the offercould also receive attention, such as theavailability of amenities and communalresources such as shared gardens. By examiningthe factors that have been successful in creatingdesirable flat-living elsewhere it may bepossible to extend this to the UK.

Existing housing stock

Although more housing will be required over thecoming years, the existing stock is substantial,comprising some 26 million dwellings. Two-thirds of the homes of 2050 are probablyalready in existence83 so any successfulprogramme of policies must consider the existingstock alongside the development of new homes.

Energy efficiency

Improving the energy efficiency of the housingstock will be necessary if the UK is to meet itsclimate change commitments. Behaviouralchange has a part to play in householdsreducing their energy use and standards can beintroduced to ensure that new build stockperforms well from the outset. In addition tothese measures, physical changes to theexisting housing stock will be necessary iftoday’s homes are to make their contributionto increased energy efficiency. Improvedenergy efficiency of housing can also play apart in reducing ongoing householdexpenditure, particularly if energy prices rise.

Could incentives be provided for people toimprove their homes, including their energyperformance, during the current downturn?

Recessions often create a situation wherebysome people are actually better off, despitethe difficulties faced by many people throughproblems such as redundancy.

Incentives provided to those who are stillrelatively well off could encourageimprovement of the housing stock, andtherefore support employment in theconstruction industry.



Could a programme of loans bedeveloped to increase the energyefficiency of homes, with the loanrepayments offset against decreasedenergy costs in the future?

The goals of the programme would includehelping to achieve retrofitting of the existingstock to reduce carbon emissions in line withinternational obligations and national legislationand manage the consequences of environmentalvulnerabilities. Residents would also experiencean effective reduction in energy costs once loansare paid off, and insulation from volatility inenergy pricing from the point of installation.

The state-owned German bank, KfW, operatesloan schemes to promote energy efficiency inthe housing sector, including through therehabilitation of existing housing stock. Loansare available for up to 100 per cent of theeligible costs, on favourable terms, includinglow interest rates with long fixed terms andgrace periods at the start of the loan when norepayments are due.

Such a programme could involve energycompanies and others in soft loan provision.One option might be to attach loanrepayments to the property rather than thepresent occupant. Tax incentives could beused to stimulate the programme.

Could some ideas from the proposedGreen New Deal be used in improving theexisting housing stock, to combinedelivering investment and training in skillsfor greening and refurbishment?

The Green New Deal Group84 proposes amassive environmental transformation of

the economy to tackle what it terms the‘triple crunch’ of the financial crisis, climatechange and insecure energy supplies. Thegroup calls for massive investment inrenewable energy and wider environmentaltransformation in the UK, leading to thecreation of thousands of new ‘green collarjobs’, simultaneously addressing issues ofunemployment caused by the downturnand climate change.

The existing housing stock is a majorcontributor to the nation’s carbon emissions,and retrofitting the stock to deliver thenecessary reductions will be both labour- andskills-intensive. It makes sense to focus thepublic investment in training and labour at atime of recession to keep people inemployment or training, as well as to actpromptly due to the pressing nature ofclimate change.

Vacancy and under-occupation

Under-occupation is the term used todescribe households that have homes largerthan they would typically need for thenumber and relationship of people occupyingthe dwelling, for example a couple occupyinga four bedroom house. Common reasons forunder-occupation can include olderhouseholds wanting to have space availablefor family to return to visit. Under-occupationcan occur in any tenure.

If under-occupation were reduced somesmall households would move into smallhomes, freeing up large homes for largerhouseholds to occupy. This would allowmore households to obtain housingsuitable to their needs within the existingstock.



Although persuading under-occupyinghouseholds to trade down would help torespond to pressing needs for larger homes, anyattempt to deal with under-occupation mustaccept that people should be free to make theirown choices and be sensitive to people’s bondsto the homes that they may have occupied formany years. Responses should be structured toprovide incentives for downsizing notpunishment for continued under-occupation.

Should guidance for local authorities onconducting housing needs assessmentsrecommend that account is taken ofunder-occupation?

In many areas under-occupation is potentially asignificant factor in the housing market, yetlittle data is gathered on the extent in surveysdesigned to assess local housing need. Bygaining an evidence base about the level ofunder-occupation in their areas, localauthorities would be better placed to makestrategic decisions about how best to addressthis issue (for example by encouragingdevelopment of housing in the area that wouldbe appealing for people to downsize into).

In order to achieve this it may be necessary toupdate the definition of under-occupation,which is still based on standards establishedbefore the Second World War, to better reflectcontemporary social norms.

Is it possible to create a compelling offerto help deal with the problems of under-occupation?

People are understandably reluctant to usetools of compulsion to try to force people out

of their homes, be they tenants or owneroccupiers.

A much more acceptable approach to achievethe same ends would be to provide anattractive alternative housing offer so thatpeople under-occupying their homesvoluntarily chose to move.

Much of the housing that is under-occupiedbelongs to older people whose families haveleft home, so a focus on creating housing thatwould be appealing to that group would be aparticularly useful response to issues ofunder-occupation. There appear to be limitedhousing options for older people. The Homesand Communities Agency has established anew innovation panel to ensure that futurehousing meets the needs and aspirations ofan ageing population.

An attractive offer might include communalguest flats (as those under-occupying often do soto have space for family to visit) and space thatresidents can use for offices. In considering suchan offer it is important to remember that theunder-occupied property will often be more thanjust a house – it will be a home, with feelingsand memories attached. This implies that thereplacement will have to be exceptionallyappealing, if it is to prove desirable enough toattract people out of their homes.

What steps can be taken to improve localauthorities’ empty dwelling managementorder (EDMO) powers to ensure they aredeliverable, sensible, and not a financialdrain on the authority?

EDMOs, and other tools for tackling emptydwellings, aim to help make more efficient



use of the existing stock. The current EDMOsystem is difficult and expensive for localauthorities to use in practice.

Could changes to the probate system helpto reduce the number of empty homes?

At present homes are often not sold until theend of the probate process, leaving themempty in the interim. A legislative change topermit them to be sold before probate hasbeen settled could allow them to be broughtback into use more promptly.

Enhanced tenure options andflexibility

For those seeking a secure home, the onlyreal option is often owner occupation. Whilstsocial renting provides good security oftenure, access to it is highly constrained. Thislack of realistic alternatives can lead to peopleopting for owner occupation when it may notbe suitable, for example by overstretchingthemselves financially. A broader range oftenure options, including options withenhanced levels of security of tenure, areneeded to help avoid this.

Can additional tenure options be createdthat are more secure than assuredshorthold tenancies in the private rentedsector, but fall short of a fully securetenancy?

A tenure option falling between a six monthassured shorthold tenancy and security oftenure for life would be very appealing forsome private tenants who are at present

forced to move into owner occupation ifthey want to establish a home where theywould be able to stay for a long period oftime. Consequently steps to provide moresecure options in the private rented sectorwould save some households fromoverstretching themselves, and the resultantsocial costs.

Under current legislation private rentedsector landlords can offer, for example, afive year tenancy with a tenant’s breakclause, but it is very uncommon for them todo so. In general, if the tenants are notcausing any problems and are paying therent, most landlords would not want them tomove out. One possible factor preventingmore landlords entering extendedagreements is lenders’ attitudes to longtenancy terms. If the landlord has amortgage, the provider is likely to insist on amaximum length of tenancy of around 12months as it wishes to be easily able to gainvacant possession of the property in theevent of the landlord defaulting on therepayments.

Steps to encourage lenders to look morefavourably on allowing longer-termtenancies might include a presumption ofappointing a receiver of rents in the eventthat the landlord falls into arrears, and astructure that makes that viable, so thelender continues to receive an income fromthe property.

Another step to promote additional securityof tenure in the private rented sector mightbe the use of incentives, possibly includingtax incentives. Landlords could receive someform of favourable treatment if they werewilling to grant longer-term tenancies.



Could there be more flexibility on rentlevels in the social sector?

At present, there are strong central controlson social housing rent levels. These ensurethat social landlords do not increase rentslevels unreasonably, but do not provideflexibility to reflect improvements that aremade to housing stock. Should there be morefreedom for housing associations and localauthorities to set rents that relate to differentproperties, people and market contexts?

One specific example of when it might besuitable to allow social rents to be increasedis in response to works undertaken toimprove the energy efficiency of the property.As this measure would be saving the tenantmoney on their energy costs, they would notbe left out of pocket. This would encouragelandlords to take the relevant steps, as theywould know they would have a revenuestream to contribute towards the cost of theworks, in the form of increased rent.

How can we ensure that any levelling ofsecurity of tenure is achieved byincreasing security in the private rentedsector rather than reducing the security ofthose who rent in the social rentedsector?

The lack of security offered byaccommodation in the private rented sector isone of the most common complaints madeby tenants. Increasing the security offered totenants in the private rented sector mightimprove the attractiveness of this tenure.However, increased security of tenureinherently requires some degree of rentcontrol, as otherwise landlords can force

tenants to leave their property by inflatingthe rent to an unaffordable level. Carefulconsideration would be needed to ensure anycontrols were designed to avoid a mass exit oflandlords from the private rented sector,leading to a reduction in investment in thesector and consequently in the housingsystem as a whole. Rent controls would needto take account of the variability of a numberof factors that affect landlords’ costs, andtherefore the rent they charge (such aschanges in interest rates affecting borrowing,what other bills were included in the rent andhow they might change, or the location of theproperty and the tenant group it was beinglet to). Tax incentives that promote qualityand security of tenure in the private rentedsector might provide a way of improving theattractiveness of the tenure withoutdiscouraging further investment.

Full security of tenure can prevent dwellingsbeing made available for a short period oftime (for example where an owner wants todefer selling in depressed market conditions).Increased security for tenants needs to bebalanced against reasonable flexibility forowners.

Could social landlords play an enhancedrole in the provision of properties formarket rents?

The involvement of social landlords in theprovision of market rental properties couldhelp to strengthen the standing of the sectorand provide diversity of supply. Landlordsmay be able to develop or acquire propertiesthat it would not be viable for them to run associal rental properties, adding to the numberof people who can benefit from the good



management services and security of tenurewithin the social rented sector.

With appropriate constraints to avoidinappropriate decisions (and particularly toexclude net reductions in the social rentedstock), social landlords could even gainflexibility to respond to different types ofhousing need and market demand if theywere to have some flexibility about whetherproperties becoming available for re-lettingwere let on a market or social rental basis.

Could the Right to Buy be restructured toallow the purchaser to stay in their homeand community whilst moving tenure, butwithout putting the local authority out ofpocket?

At present when properties are sold underRight to Buy the combination of the discountand the proportion of the sale price remittedto central government means local authoritiesreceive significantly less than the cost ofreplacement with similar stock. Receivingonly a fraction of the market value of theproperty means that a local authority wouldnot be able to replace a high enoughproportion of the stock sold.

One advantage of Right to Buy is that it permitspeople to stay in their home and the communitywhere they may have strong links yet still realisetheir aspiration of owner occupation.

If the discount were removed, and the localauthority were to receive a substantialproportion of the market value of theproperty for reinvestment, the Right to Buypolicy could be retained whilst minimisingnet loss in the social rented housing stock.

How can the opportunity to movebetween tenures be increased?

At present it is often very difficult to movebetween tenures, particularly if you do notwish to move home. Where the choice doesexist it often only operates in one direction.For example, through Right to Buy a socialtenant can become an owner occupier, but anowner occupier, staying in their home, isunlikely to be able to become a social tenant.

Although various low-cost home ownershipschemes have instituted the possibility forshared ownership, where rent is paid to ahousing association on the part of the propertythat the occupier does not own, and the abilityto ‘staircase up’ the amount of ownership, theability for an outright owner to sell apercentage of their property to a sociallandlord does not currently exist. Schemes thatwould allow tenants in the private rentedsector to build up a stake in a housing-relatedasset, could also be considered.

Creating place/neighbourhoods

People experience housing on a local level,and the development of vibrant and thrivingplaces will support (and be supported by)successful local housing systems.

Could central government enable thedevelopment of stronger localcommunities by reinforcing the powers oflocal government?

Across political parties there are nationalpoliticians who are proponents of devolvingresponsibilities towards local levels. If that is



to be successful then power and resourcesneed to be attached. As identified by theLayfield Committee as long ago as 197685, anincrease in local autonomy would require asignificant increase in local financialautonomy, with local taxes going to localgovernment.

The extensive powers (including of taxation)devolved to strong regional and localgovernments in Germany have been cited as acontributory factor in the country’s housingsuccesses.

The additional fiscal freedom, withsignificant local tax bases, common in localand regional government in Europe providesthem with a greater ability to borrow,making it more feasible to deliverinfrastructure and increase their involvementin important place-making projects such asland assembly. The ability to use additionalmechanisms such as tax increment financing(TIF) may also be enhanced by the presenceof a local tax base.

One important consideration in establishingthe limits of devolution of powers to locallevels would relate to delivery of housing,especially affordable housing, where there isfrequently local resistance to its development.The views of existing residents will have to bebalanced against the needs of people whorequire access to affordable housing.

Can links between local authorities andsmaller local housing associations befacilitated?

Large housing associations, with theirsignificant capacity to deliver social rented

housing, are an important part of the housingsystem. However, for local authorities lookingto shape their areas, smaller housingassociations may sometimes represent abetter opportunity to work with anorganisation that has a local focus and alonger-term commitment to the area.

Should incentives be introduced toencourage local authorities to welcomedevelopment in their areas?

At present local authorities have a fiscaldisincentive for permitting development intheir area: council tax derived from theproperties provides a relatively smallproportion of the cost of delivering localservices and there is a time delay before theremaining costs are provided from centralgovernment, leaving a shortfall in theinterim.

If local authorities were to receive themajority of the resulting income fromdevelopment they would have a strongincentive to welcome development. There issome evidence that this type of approachdelivers benefits to local authorities inGermany and Switzerland86. Potential optionsinclude long-term council tax retention and amodified formula for deriving grants fromcentral government.

As democratically-elected organisations, localauthorities are naturally conscious ofconstituents’ concerns over development intheir areas. Incentives that would allow localauthorities to provide benefits to existingresidents as a result of the development couldhelp local authorities to welcome it to theirarea.



How can we improve the management ofplaces (as opposed to just homes)?

The neighbourhood and wider area in whichyou live can be as important as the individualproperty in determining quality of life andsocial outcomes. Local authorities will have acentral role in delivering changes that improveplaces as well as individual dwellings, but itwill also require close cooperation between avariety of stakeholders including housingassociations, ALMOs, private landlords andthe wider public sector (for exampleeducation and healthcare services).

A strong local authority might, for example,identify that what is most needed to make itsarea desirable is an investment in transportinfrastructure, such as a local tram service or ahigh speed rail link. Allowing local authoritiesthis sort of breadth of powers to take a role inshaping their areas could lead to improvedneighbourhood and housing outcomes.

Local authorities would have the opportunityto promote the concept of place/neighbourhoods, and urban authorities couldseek to create inclusive and socially integratedcities. Housing and the promotion of socialand economic integration have strong impactson each other.

Should the Housing Revenue Accountsubsidy system be dismantled?

Under the present system, local authorityhousing revenues are effectively pooledcentrally, with local authorities that areoperating in surplus subsidising those that areoperating at a loss. A major cause of thedisparity between the financial standing of

local authorities’ housing operations is thehistoric level of debt attached to their stock.

A system whereby, through a one-off transferof obligations, the playing field would belevelled for all local authorities has beenproposed. This scheme would give localauthorities more freedom, facilitating a movetowards autonomous budgeting andmanagement at a local level. This proposalhas been supported by government in arecent consultation paper on the subject87.However, there is still work to be done todeliver real changes to the system.

Can the public sector achieve some of itsgoals through an enabling/disseminatingrole?

Amongst its other roles, the public sector coulddisseminate information to help people seewhat is possible, allowing local communities toconduct the project themselves. By providinggeneral and contextual support the public sectorcould enable some people to achieve desirableoutcomes without having to foot the bill itself.

Do the newly-created, largely rural unitaryauthorities present an opportunity for morecreative thinking in the provision of housingthan their predecessor authorities?

In the parts of the country affected, therecent change to (largely rural) unitaryauthorities has been one of the biggestchanges to local government in many years.These new organisations bring together thepowers of districts and counties; thisempowerment, combined with their novelty,presents an opportunity for creative thinking



about how best to address the housing needsof their populations.

Should local authorities and housingassociations be encouraged/supported tobuy and sell housing stock to meet needs?

The ability to manage their portfolios ofhousing stock by trading would enablelandlords to consider what stock would bestmeet the needs of their (potential) tenants. Itmay be that identified need could suggestthat stock would be more useful if providedin a different area (also helping to reduceconcentrations of social rented housing onmono-tenure estates), or could indicate thatdifferent types of housing are needed.

Stock could be assessed for trading as itbecomes empty through the normal turnoverof tenancies.

Research and the evidence base

Improving the housing system in the UK willdepend upon a strong evidence base. Atpresent, most housing research and policydevelopment is focused around specific issueswithin the system. The development of a wholesystem approach will require new types ofevidence to support it.

What would be the benefits ofcomparative evaluation with housingsystems in other countries, as well asbetween the UK’s constituent nations?

An understanding of how other housingsystems work, the contexts in which they

operate, and their relative strengths andweaknesses would be a valuable first step inreviewing the UK’s current housing system.Not only would this enable the strengths andweakness of our system to be brought intoclearer focus, it would also suggest alternativeways of addressing the broad range of issuesthat impact directly or indirectly on thehousing system.

Many of the European and North Americanhousing models are significantly different fromthat in the UK. The German system, forexample, has greater diversity of stock andproviders, a wider range of tenure options andeasier inter-tenure mobility. The Netherlandshas significantly changed the way in which itshousing associations operate. Canada andSweden have both experienced sharp drops ingrant subsidy for future provision and couldprovide valuable lessons for how we couldcope with lower grant levels in the future.There are a broad range of different policyregimes within the USA, some of which couldalso bring lessons for the UK.

With the devolution of housingresponsibilities to Wales, Scotland andNorthern Ireland, different approaches havebeen employed to address housing problemsin these nations. There are valuable lessons tolearn from each other about what has, andhas not, been successful.

Could a stronger evidence base beensured by enhancing the housingresearch capacity of UK universities?

The volume of housing research in UKuniversities is now significantly lower than itwas five years ago and can be expected to



decline further with the anticipated futurereductions in university research funding.

Increasing this research capacity is vital ifgovernment policy is to be developed inresponse to a thorough analysis of therelevant problems. The wider impact of theresearch findings could be enhanced ifuniversities focussed part of their researcheffort on the knowledge transfer process, inaddition to carrying out primary research.

How can proposals for amendments tothe housing system (and current policyand regulatory frameworks) be cross-checked to ensure that they do not tripeach other up?

In the light of recent events, the interconnect-edness of the housing system has become in-creasingly apparent. A greater understanding

of the system as a whole, as well as how it in-teracts with the wider economy and financialsystem, will enable a more thorough ‘proof-ing’ of new policy approaches in terms oftheir system-wide impact. It would thus beeasier to avoid the hidden traps of subsidiesand incentives that are acting in opposite di-rections, as for example with the differentVAT treatments of new construction and refur-bishment; as well as the unintended conse-quences of policy changes. One of thechallenges that might arise in undertakingthese reviews is the large number of govern-ment departments likely to be involved invarious related policy areas.

An audit of the various regulatoryframeworks would help to build anunderstanding of the system as a whole, aswell as providing an understanding of theextent of regulatory pressure on differentparts of the system.



Mr Jim BennettHead of Policy and Strategy, Homes andCommunities Agency

Ms Elizabeth BroganFormerly Senior Policy Officer, NationalLandlords Association

Dr Stuart Burgess, CBEChairman and Rural Advocate, Commissionfor Rural Communities

Mr Pete ChallisNational Officer (Local Government andHousing), UNISON

Mr Adrian ColesDirector General, Building Societies Association

Mrs Diane DiaconDirector, BSHF

Mr Tarek El DiwanyPartner, Zest Advisory LLP

Professor Alan EvansDirector, Centre for Spatial and Real EstateEconomics, Henley Business School

Mr Ian FletcherDirector of Commercial and Residential,British Property Federation

Ms Alison GelderChief Executive, Housing Justice

Ms Jill GibbsTrustee, BSHF

Dr Vincent GruisAssociate Professor of Housing Management,Delft University of Technology

Dr Rod HackneyManaging Director, Rod Hackney andAssociates Ltd

Mr Tim Helweg-LarsenDirector, Public Interest Research Centre

Dr Judith HermansonSenior Vice President, CHF International

Herr Thomas Knorr-SiedowSenior Researcher, Institute for RegionalDevelopment and Structural Planning

Mr Toby LloydManaging Consultant, NavigantConsulting

Ms Grainia LongDirector, Chartered Institute of Housing inNorthern Ireland

Professor Duncan Maclennan, CBEDirector, Centre for Housing Research,University of St Andrews

Professor Stephen MalpezziAcademic Director, Graaskamp Centerfor Real Estate, Wisconsin School ofBusiness

Mr Derek MartinDirector of Housing and Regeneration,Nottingham City Council


Participants at the Consultation

Mr David OrrChief Executive, National Housing Federation

Mr Ben PattisonPolicy and Research Officer, BSHF

Mr Alan PearsonTrustee, BSHF

Ms Heather Petch, OBEDirector, hact (The Housing Associations’Charitable Trust)

Ms Liz PhelpsSocial Policy Officer (Housing), Citizens Advice

Mr Dennis Rees, OBEChair, Derby Homes

Mr Josh Ryan-CollinsResearcher, nef (The New EconomicsFoundation)

Mr Rynd SmithDirector of Policy and Partnerships, RoyalTown Planning Institute

Mr Mark ThomasHead of Policy, Shelter

Ms Julia Unwin, CBEChief Executive, Joseph RowntreeFoundation

Mr Jim VineHead of Programme (UK Housing Policy andPractice), BSHF

Ms Sarah WebbChief Executive, Chartered Institute ofHousing

Professor Christine Whitehead, OBEProfessor of Housing Economics, LondonSchool of Economics and Political Science

Professor Steve WilcoxProfessor of Housing Policy, The Centre forHousing Policy, University of York

Dr Peter WilliamsIndependent Consultant and HonoraryProfessor, The Centre for Housing Policy,University of York

Four panellists joined the Consultation on thefinal day. They were:

Ms Kate Barker, CBEAuthor of the Barker Review of HousingSupply

Mr Stuart MacdonaldEditor, Inside Housing magazine

Mr Bill RashleighEditor, ROOF magazine

Mr John StewartDirector of Economic Affairs, Home BuildersFederation

The consultation was chaired byLord Richard Best, OBE

Participants at the Consultation


1 Maclennan, D. (2008) Trunks, Tails, and Elephants: Modernising housing policies, European Journal of Housing

Policy, vol. 8, no. 4, pp 423-440.

2 Wilcox, S. (2008) UK Housing Review 2008/2009, Coventry, CIH/BSA, Table 17c.

3 Ball, M. (2009) European Housing Review 2009, London, RICS.

4 Communities and Local Government (2009) Housing Statistics Live Table 801: Household characteristics, tenure

trend, from 1918, London, CLG.

5 Communities and Local Government (2009) Housing Statistics Live Table 241: House Building, London, CLG.

6 Shelter (2008) Breaking Point: How unaffordable housing is pushing us to the limit, London, Shelter.

7 Hellebrandt, T., Kawar, S. and Waldron, M. (2009) The Economics and Estimation of Negative Equity, Bank of

England Quarterly Bulletin, Quarter 2, pp 110-121.

8 Miles, D. and Pillonca, V. (2008) Financial Innovation and European Housing and Mortgage Markets, Oxford

Review of Economic Policy, Vol. 24, p145.

9 The Financial Services Authority (2009) Financial Risk Outlook 2009, London, FSA.

10 Organisation for Economic Co-operation and Development (2005) Recent House Price Developments: The role of

fundamentals, OECD Economic Outlook 78, pp 123-154.

11 Barker, K. (2004) Barker Review Final Report, London, HM Treasury.

12 Wilcox, S. (2008) UK Housing Review 2008/2009, Coventry, CIH/BSA, Figure 1.2.4.

13 Hellebrandt, T., Kawar, S. and Waldron, M. (2009) The Economics and Estimation of Negative Equity, Bank of

England Quarterly Bulletin, Quarter 2, pp 110-121.

14 Pension Commission (2004) Pensions: Challenges and Choices, The first report of the pension commission,

London, The Stationary Office.

15 The Financial Services Authority (2009) The Turner Review: A regulatory response to the global banking crisis, London, FSA.

16 The Financial Services Authority (2009) The Turner Review: A regulatory response to the global banking crisis, London, FSA.

17 Nationwide Building Society (2009) Nationwide House Price Index: Data download,

http://www.nationwide.co.uk/hpi/historical.htm

18 Communities and Local Government (2009) Housing Statistics Live Table 241: House Building, London, CLG.


20 Wilcox, S. (2008) Can’t Buy Can’t Supply: The affordability of private housing in Great Britain, London, Hometrack.

21 Wilcox, S. (2008) UK Housing Review 2008/2009, Coventry, CIH/BSA.

22 Wilcox, S. (2008) Can’t Buy Can’t Supply: The affordability of private housing in Great Britain, London, Hometrack

23 National Housing Federation (2009) One in Ten People will be on a Social Housing Waiting List by 2020,

Federation Warns, http://www.housing.org.uk/default.aspx?tabid=212&mid=828&ctl=Details&ArticleID=2218

24 Ball, M. (2008) European Housing Review 2008, London, RICS, page 114.

25 Communities and Local Government (2007) Homes for the Future: More affordable, more sustainable, London, TSO.

26 National Housing and Planning Advice Unit (2009) More Homes for More People: Advice to Ministers on housing

levels to be considered in regional plans, Titchfield, NHPAU.

27 National Housing and Planning Advice Unit (2009) Housing Requirements and the Impact of Recent Economic

and Demographic Change, Titchfield, NHPAU.


References

28 Ball, M. (2005) RICS European Housing Review 2005, London, RICS.


30 22.3% decrease for flats compared to 17.6% for all properties, Q2 2007 to Q1 2009, using Nationwide House

Price Index, http://www.nationwide.co.uk/hpi/historical.htm

31 Communities and Local Government (2009) Housing Statistics Live Table 404: Household estimates and projections

by household type and region, England, 2007 to 2031, London, CLG and Communities and Local Government

(2009) Housing Statistics Live Table 209: Permanent Dwellings Completed by Financial Year, London, CLG.

32 Department for Environment, Food and Rural Affairs (2009) Carbon Dioxide Emissions by End User,

http://www.defra.gov.uk/environment/statistics/globatmos/gakf07.htm

33 The Climate Change Act 2008, London, TSO.

34 Communities and Local Government (2007) Building a Greener Future: Policy statement, London, CLG.

35 Environment Agency (2009) Flooding in England: A national assessment of flood risk, Bristol, EA.

36 National Energy Action (2009) Budget is a Missed Opportunity to Help Millions out of Fuel Poverty,

http://www.nea.org.uk/Budget-is-a-Missed-Opportunity

37 Communities and Local Government (2009) Housing Statistics Live Table 402: Household estimates and

projections by household type, England, 1971-2031, London, CLG.

38 Communities and Local Government (2009) Housing Statistics Live Table 412: Household projections by age of

household reference person, England, London, CLG.

39 National Housing and Planning Advice Unit (2009) Housing Requirements and the Impact of Recent Economic

and Demographic Change, Titchfield, NHPAU.

40 Wilcox, S. (2008) UK Housing Review 2008/2009, Coventry, CIH/BSA, Table 23b.

41 Wilcox, S. (2008) UK Housing Review 2008/2009, Coventry, CIH/BSA, Table 23b.

42 Healy, J. (2003) Excess Winter Mortality in Europe: A cross country analysis identifying key risk factors, Journal of

Epidemiology and Community Health, vol. 57, no. 10.

43 National Institute for Health and Clinical Excellence (2005) Housing and Public Health: A review of reviews of

interventions for improving health, London, NICE.

44 Lupton, R. et al (2009) Growing Up in Social Housing in Britain: A profile of four generations, 1946 to present

day, London, TSA/JRF.

45 Hills, J. (2007) Ends and Means: The future roles of social housing in England, London, LSE.

46 Page, D. (2006) Respect and Renewal: A study of neighbourhood social regeneration, York, JRF.

47 Parkinson, M. et al (2009) The Credit Crunch and Regeneration: Impacts and implications, London, CLG.

48 Cadell, C., Falk, N. and King, F. (2008) Regeneration in European Cities: Making connections, York, JRF.

49 Communities and Local Government (2008) No One Left Out: Communities ending rough sleeping, London, CLG.

Mayor of London (2009) The London Housing Strategy: Draft for public consultation, London, GLA.

50 Shelter (2008) Breaking Point: How unaffordable housing is pushing us to the limit, London, Shelter.

51 Equality and Human Rights Commission (2009) Gypsies and Travellers: Simple solutions for living together, London, EHRC.

52 Robinson, D., Reeve, K. and Casey, R. (2007) The Housing Pathways of New Immigrants, York, JRF.

53 Beresford, B. and Rhodes, D. (2008) Housing and Disabled Children, York, JRF.

54 Council of Mortgage Lenders (2009) Market commentary,

http://www.cml.org.uk/cml/publications/marketcommentary/160

55 24dash (2009) Shelter Warns Treasury Select Committee Over ‘Second Wave’ of Repossessions, http://www.24dash.com/

news/ Housing/2009-06-30-Shelter-warns-Treasury-Select-Committe-over-second-wave-of-home-repossessions

References



57 Rugg, J. and Rhodes, D. (2008) The Private Rented Sector: Its contribution and potential, York, The University of York.


59 Hills, J. (2007) Ends and Means: The future roles of social housing in England, London, LSE.

60 Cave, M. (2007) Every Tenant Matters: A review of social housing regulation, London, CLG.

61 Communities and Local Government (2009) Reform of Council Housing Finance: Consultation, London, CLG.

62 Communities and Local Government (2009) Housing Statistics Live Table 502: House prices from 1930, annual

house price inflation, United Kingdom, from 1970, London, CLG.

63 Nationwide Building Society (2009) Nationwide House Price Index: Data download,

http://www.nationwide.co.uk/hpi/historical.htm

64 HM Treasury (2008) Mortgage Finance: Final report and recommendations, London, HM Treasury.

65 The Killian Pretty Review (2008) Planning Applications: A faster and more responsive system, London, CLG.

66 The Callcutt Review (2007) The Callcutt Review of Housebuilding Delivery, London, CLG.

67 Parkinson, M. et al (2009) The Credit Crunch and Regeneration: Impacts and implications, London, CLG.

68 International Monetary Fund (2009) World Economic Outlook, Washington, IMF, page xvi.

69 HM Treasury (2009) Budget 2009: Building Britain’s future, London, HM Treasury.

70 CECODHAS (2008) CECODHAS Vision Statement,

http://www.cecodhas.org/images/stories/CECODHAS/vision%20statement%20%20final.pdf


72 JRF Housing Market Taskforce (2009) http://www.jrf.org.uk/work/workarea/housing-market-task-force

73 Foresight (2008) Powering Our Lives: Sustainable energy management and the built environment, final report,

London, Foresight.

74 UK Green Building Council (2008) Low Carbon Existing Homes, London, UKGBC.

75 Johnson, V., Simms, A. and Cochrane, C. (2009) Tackling Climate Change, Reducing Poverty: The first report of the

roundtable on poverty and climate change in the UK, London, nef.

76 All Party Urban Development Group (2009) Regeneration and the Recession: Unlocking the money, London, BPF.

77 Communities and Local Government (2009) Mortgage Rescue Scheme,

http://www.communities.gov.uk/housing/buyingselling/mortgagerescuemeasures/

78 Nationale Hypotheek Garantie (2009) The Homeownership Guarantee Fund, http://www.nhg.nl/english.html

79 All Party Urban Development Group (2009) Regeneration and the Recession: Unlocking the money, London, BPF.


81 Balchin, P. and Rhoden, M. (2002) Housing Policy: An Introduction, fourth edition, page 40, Oxford, Routledge.


83 House of Commons, Communities and Local Government Committee (2008) Existing Housing and Climate

Change, London, TSO.

84 Green New Deal Group (2008) A Green New Deal: Joined up policies to solve the triple crunch of the credit crisis,

climate change and high oil prices, London, nef.

85 Layfield Commission (1976) Local Government Finance: Report of the committee of enquiry, London, HMSO.

86 Evans, A. W. and Hartwich, O. M. (2005) Bigger, Better, Faster, More: Why some countries plan better than others,

London, Policy Exchange.

87 Communities and Local Government (2009) Reform of Council Housing Finance: Consultation, London, CLG.

All websites were accessed in August 2009

References




TheFuture

ofH

ousing:R

ethinkingthe

UK

housingsystem

forthe

twenty-first

century|

BSH

F

The Building and Social Housing Foundation(BSHF) is an independent researchorganisation that promotes sustainabledevelopment and innovation in housingthrough collaborative research andknowledge transfer.

Established in 1976, BSHF works both in theUK and internationally to identify innovativehousing solutions and to foster the exchangeof information and good practice. BSHF iscommitted to promoting housing policy andpractice that is people-centred andenvironmentally responsible. All researchcarried out has practical relevance andaddresses a range of current housing issuesworldwide.

BSHF – Promoting innovative housing policyand practice

Building and Social Housing Foundation

Memorial Square

Coalville

Leicestershire

LE67 3TU

Tel: +44 (0)1530 510444

Fax: +44 (0)1530 510332

Email: [email protected]

Web: www.bshf.org

Charity number: 270987

Price: £10.00 7420917819019

ISBN 978-1-901742-09-1

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