Knight Frank expert comments on abolishment of new homes targets


Monday 7th June 2010

Prospects for cheaper land, more trains and roads, Manchester, London, Leeds, Manchester, oh, and Gordon Brown, these are just some of the things Charles Dugdale, partner, Knight Frank London residential development passed comments on when reflecting on government plans to abolish new homes targets.

Last week the new communities secretary Eric Pickles wrote to all councils informing them that all new homes targets set by central government are to be binned.

Mr Pickles' letter stated: "I am writing... to highlight our commitment in the coalition agreements where we very clearly set out our intention to rapidly abolish regional strategies and return decision-making powers on housing and planning to local councils."

The coalition government is handing power back to local councils to set their own targets without having to deliver to a top-down regional approach. Councils now have the freedom to make their own decisions about planning and would not be restricted by regional quangos.

But is this move wise? Will it lead to a reduction in the supply of new homes in this country?

Charles Dugdale, an expert in residential development and partner at Knight Frank in London, says that his initial reaction is that it is "a great pity for the various companies that have spent vast sums promoting sites through Regional Policy with a view to having them adopted at local level".

He offers the example of North Harlow, where a JV formed between Land Securities and Places for People, which has been promoting the land at the regional level and it was identified in the East of England Plan as an area to locate at least 10,000 homes, is now unlikely to go ahead.

Dugdale comments: "Now policy has become regionalised schemes like this are unlikely to go ahead and the joint venture will undoubtedly be left with an asset considerably less valuable having spent huge sums promoting the land."

He continues: "However, on a more positive note, I would hope that the changes will mean that the costs of promoting land would decrease. Costs have spiralled over recent years and we regularly see budgets of millions of pounds being spent and these costs often stop land being promoted for development, even if it is the perfect site for development. Perhaps removing one layer of bureaucracy will simplify the process and make it cheaper."

Dugdale is critical of the previous government for "increasing housebuilder's costs at every stage".

"I can't stop thinking about Gordon Brown in those televised debates telling us that the housebuilding industry has failed us because insufficient homes have been built in Britain. I don't disagree with much of the legislation, but they are increasing housebuilder's costs at every stage."

"The time and cost of promoting land through planning has skyrocketed due to the layers of bureaucracy and the endless hoops that have to be overcome; the levels of affordable housing have been steadily increasing; the quantum of Section 106 contributions has been increasing; the costs of building housing to comply with the Code of Sustainable Homes have risen. And that's just the rising costs; also consider that the availability of debt has dried up and the rates of sale have slowed significantly. All this dramatically reduces the profitability of development, and across large swathes of the country land is now completely unviable to develop, or the land value has fallen so dramatically that vendors have no interest in selling it for development.

"Ultimately, my feeling is that regional policy has a place, but that it needs to be at a government level. I think the widely held assumption that rising house prices in the South East means we need to build more in the South East is generally wrong and that the implementation of good infrastructure around the whole of the UK should be considered. Much like when a new road is built and it is immediately chocker with traffic; everyone says ‘new roads create traffic, we should build less'. No, the road is instantly full because our road building programme is decades behind where it should be and the network is wholly inadequate. If we were to embark on a national programme to make all the 'A' trunk roads into dual-carriageways, then I am certain we might redress the balance. Part of the solution to high prices in the South is a combination of infrastructure and regional policy.

"All our provincial Cities should be thriving hubs. Birmingham should be less than half an hour from London by train, Leeds and Manchester less than an hour. Companies that locate their back office in Croydon would then think about locating them in Birmingham, and where there are jobs, people will follow. There are endless underutilised housing areas in the regions and these should all be brought back into the housing stock by a re-balancing of the economy into regional cities. So to resolve any ‘failures of the housebuilding industry' the Government needs to invest in the infrastructure which will facilitate the balance of jobs and therefore the demand for housing. It all comes down to roads and trains."