HBF FACTS & MESSAGES BULLETIN Q1 2015 Published Jan 2015
Introduction The latest edition of the HBF Facts and Messages Bulletin includes up-to-date statistics and commentary on the subjects listed below. If there is anything you would like to see in future editions or if you would like any other information in the meantime, please contact David O Leary. Contents Housing crisis 2 Current house building indicators 4 Planning permissions 6 House building and economic growth 7 Property transactions 8 Help to Buy 9 Mortgage finance 11 Accusations of land hoarding and Use it or lose it 11 Land Use: Green Belt, Brownfield and Greenfield 12 Business environment for small and medium-sized house builders 15 Planning 16 Space standards 17 1
Housing crisis England s housing crisis, brought about by a long-term under-supply of new homes and exacerbated by the recent recession, is fast becoming a major social and economic concern for policymakers and those responsible for the country s global competitiveness. In May 2014, the Governor of the Bank of England, Mark Carney, referred to the housing shortage and the resulting distortion of the housing market as the biggest risk to financial stability, and therefore to the durability of the [economic] expansion. An HBF report published in March 2014 which looked at the 10 years since the Treasury commissioned Barker Review of Housing Supply in 2004, estimated that the housing shortage which was by then beginning to concern the Government has grown by at least one million over the last decade, equivalent to nine years worth of output. Put another way, in order to get back to the position we were in in 2004, we would require two and a half times as many homes as can be found in Birmingham. Housing crisis: key facts 6.7 x (avg salary) + 34 % In the last 15 years the average house price to salary ratio has almost doubled; the average house price in England is now around 6.7 x average salary There are currently just under 1.4 million households on social housing waiting lists in England a 34% increase since 1997 + 40 % Close to a fifth of women and a third of men aged 20-34 are now living at home with their parents an increase of 1 million (40%) since 2002. In all, 3.3million 20-34 year olds are still living in their family homes 59,710 households 59,710 households, including 85,000 children, are in temporary accommodation awaiting a home 2
Public and business concern Other In a survey published by YouGov on 10 December, housing was ranked as the fifth most important issue with 20% of respondents listing it as one of their top three concerns. Housing was thus deemed more important than education (13%), crime (10%) and transport (3%). In London, more than a third of people (35%) rated housing amongst the top three issues facing the capital. 56% Crime 10% Transport Housing 20% Education 13% 3% 80% 80% of people now believe there is a housing crisis in Britain. This falls to 45% who agree that there is a housing crisis in their local area. (Ipsos MORI, 13th Feb 2013) 45% 77%of young people believe it is now harder for them to own a home than it was for their parents generation (YouGov for National Housing Federation, September 2014) 3
Current house building indicators Key indicators of house building activity continue to show an extremely positive upward trajectory but remain well below the levels required to meet demand and ultimately address the housing crisis. NHBC registrations The National House Building Council (NHBC) recorded 13,950 registrations during October 2014, a 10% increase on the same month in 2013 and the highest number recorded in a single month for more than three years. The rolling quarter to October 2014 saw a 14% increase compared with the same period in the previous year. Private sector registrations were up by 20% during the rolling quarter compared with the August to October timeframe in 2013. Housing starts and completions 32,890 new housing starts were recorded by official government figures in Q3 2014, a small overall increase on the same period in 2013. Private housing starts in Q3 2014 were up by 4% on the same period the previous year (to 27,190), registering the highest number of starts by private house builders for a summer quarter since 2007 4
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Planning permissions Latest figures released by HBF on 18th December, show that in Q3 2014 there were 41,800 permissions granted in England and 3,700 in Wales. This takes the annual number of permissions to the end of September 2014 to 195,000. In England and 9,500 in Wales. These figures are yet more evidence of the positive effects of the National Planning Policy Framework (NPPF). The overall number of permissions in England is now less than 10% away from the levels seen prior to the crash at the beginning of 2007. The figures for Wales are particularly encouraging. In the most recent quarter, there were more planning permissions recorded (both sites and units) than in any quarter since Q2 2008. If you would like to find out more about the HBF/Glenigan data, including regional figures, please view the latest information on the HBF website or contact David O Leary. 6
House building and economic growth As well as the obvious social benefits that come with building more new homes, increasing house building activity is very important in boosting the national economy through the creation of local jobs. Every 1spent on housing puts 3 back into the economy = and with almost 90% of building materials made in the UK the benefits are felt right across the country. Every 50,000 new homes built adds approximately 0.5% to GDP and sustains 75,000 jobs directly and nearly 50,000 indirectly. 0.5% GDP = 7
Property transactions There were 97,410 residential property transactions in England in October 2014 with a further 4,610 in Wales during the same month. The Moving Annual Total of transactions is now at its highest levels since the year up to August 2008. Activity in the market is still down by 24% compared with the pre-crash peak of more than 128,000 transactions in July 2007. According to CML, there were 29,900 loans to first-time buyers in September. This was 14% higher than in October 2013. DID YOU KNOW? More than four out of every five Help to Buy purchasers are first-time buyers 8
Help to Buy The Help to Buy Equity Loan scheme has been a phenomenal success since its introduction in April 2013 with more than 38,000 completions in 20 months. It is helping households in England on to the housing ladder, stimulating supply and supporting sales for a wide range of house builders. The scheme is overwhelmingly helping the households that it was designed to support and the Government s announcement earlier in 2014 that it would be extended until the end of the decade provided a welcome boost to house building companies investing in land for future development. The vast majority of purchasers are first-time buyers and in areas outside of the property market hotspots that some critics claimed would overheat as a result of the scheme. Help to Buy Equity Loan has made the aspiration of home ownership achievable for many thousands of households and allowed house builders to invest with confidence, and employ thousands of young people. The Help to Buy Mortgage Guarantee scheme (AKA Help to Buy 2) which is available on second hand properties as well as new build was launched in October 2013. Help to Buy 2 has been considered more controversial for its purely demand-side impact. In the first year of its operation (up to the end of September 2014), 30,269 homes were purchased with support from the Help to Buy Mortgage Guarantee. The average sales price was 155,000 and 79% of purchasers are first-time buyers. Help to Buy Equity Loan (AKA Help to Buy 1): key facts 83% 68% 79% In the first 20 months of the scheme (to the end of November 2014), 38,052 properties bought with the support of Help to Buy, including 31,640 (83%) first-time buyers 68% of purchasers had a combined household income of less than 50,000 per annum 79% of completions were conducted with a purchase price under 250,000 The average (mean) purchase price was 211k The local authority areas that have seen the most sales are Leeds, Wiltshire, Central Bedfordshire, Peterborough, Milton Keynes and Birmingham 211K 1,200 More than 1,200 house builders have signed up, the vast majority of which are small and mediumsized companies 9
Help to Buy Equity Loan (AKA Help to Buy 1): key facts 10
Mortgage finance Even after something of a recovery in gross mortgage lending during 2013, driven at least in part by the Help to Buy stimulus, the value of gross lending is historically very low and still less than half of that in 2007. Statistics from the Council of Mortgage Lenders show that in October 2014 gross mortgage lending rose to 19bn, an increase of 8% on the same month in 2013. While the signs are positive and reflect something of a normalisation of the market, these levels are more than 40% down on the highest lending total for October which was in 2007 ( 33bn) (CML, December 2014). Lending to first-time buyers increased in October 2014. There were 29,900 first-time buyer loans (up by 12% on September and 14% on October 2013). By value, there was 4.4bn advanced to first-time buyers up by 22% on October 2013 levels. The trend is positive but some indications from the first months of 2014 suggest that this pickup is starting to slow. Bank of England statistics show seasonally adjusted mortgage approvals fell from 76,000 in January 2014, the highest monthly total since November 2007, to 59,426 in October 2014. In part this may have been the result of new tighter rules on mortgage lending. The Mortgage Market Review came into effect in April and imposes tougher scrutiny of a household s monthly outgoings and tough tests of the impact that higher interest rates could have on affordability. The Bank of England s Financial Policy Committee (FPC) also has new powers at its disposal that can be used to dampen the market should it decide that a bubble is starting to form and posing a threat to financial stability. These powers include increasing the capital requirements of lenders, requiring even higher interest rates in the banks affordability stress testing of borrowers, or even limits on loan-to-value or loan-to-income ratios. Accusations of land hoarding and Use it or lose it Speeding up the rate at which permissions are granted i.e. the move from granted to implementable - is key to significant, sustainable increases in house building. Too many sites are stuck in the planning system, with an estimated 150,000 plots at permission granted stage awaiting full sign off by local authorities. This estimate is based on research conducted by HBF and published in May 2014 in the report Permissions to Land. Furthermore, a survey of 23 house builders found that just 4% of planning permissions held by those companies were implementable. It is vital that planning departments are sufficiently resourced and that applications are processed efficiently so that work can begin on new sites more quickly. Accusations that house builders retain land with planning permission without building on it in order to wait for land values to increase is unfounded and often intentionally seeks to deflect attention from the real challenge of building the homes the country needs. The studies, including one by the Office of Fair Trading, have found in recent years that these accusations are unsubstantiated. In most cases, the numbers cited by critics and those seeking to make a political point, reporting hundreds of thousands of unbuilt planning permissions, include sites on which development has already begun, sites that are still only at outline stage in the planning process, and usually a combination of the two. The country faces a housing crisis that will take a collective effort to solve. It is therefore unhelpful when political rhetoric centres on myths when the real challenge is how we increase housing supply. The Government s recent emphasis on speeding up the planning process should address some of the entrenched issues and help house builders to get on site and building new homes more quickly. 11
Land Use: Green Belt, Brownfield and Greenfield The Green Belt is a hugely emotive planning policy tool which is often misunderstood or deliberately misinterpreted by some in the antidevelopment lobby with campaigners claiming that there is a sinister attempt by developers to concrete over the countryside. Whilst Green Belt is a planning policy designation, greenfield land is simply land that has not previously been developed. More than 70% of new homes are built on brownfield land which is to say that the site has previously had development on it, either for residential, commercial or other use. In recent months considerable attention has been paid by political parties to proposing measures that promote development on Brownfield land. Over the summer the Government launched an Invitation to Bid for Whitehall support for councils in creating Local Development Orders on Brownfield sites in up to 100 areas in England. In terms of the next Parliament, the Conservatives initially raised the idea of a Starter Homes initiative as a policy for the 2015-2020 Parliament but which has now been announced as a Coalition Government initiative. This would see developers given discounts or exemptions on certain taxes and regulations and then sell the homes at a 20% discount to first-time buyers under the age of 40. Labour have meanwhile promoted a Brownfield First policy and UKIP has suggested that Stamp Duty exemptions for buyers of new build homes on Brownfield land could make development on such sites a more attractive prospect. Green Belt designation in planning terms does not represent anything in terms of the environmental value of the land and, indeed, there is land within the Green Belt that is currently developed or is within the definition of previously developed land. Green Belt: key facts 13% of England s land area is covered by the Green Belt Since 2006, the land area of the Green Belt has increased by 0.4% More than a third of England is protected from development through being part of an Area of Outstanding Natural Beauty, Metropolitan Open Land, a National Park or the Green Belt this is the equivalent of an area larger than Denmark. Since statistics on Green Belt were first compiled in 1997 its total area has increased (after taking account of the re-designation of some Green Belt as part of the New Forest National Park in 2005). Of the 186 local authorities responsible for Green Belt, three revised Green Belt designations in last year resulting in a total reduction of 0.03% in Green Belt coverage in the year. Since 2010, 13 local authorities have altered Green Belt designations resulting in three increases in local Green Belts and 10 reductions. The largest change to any authority s Green Belt designation in the last four years was in Purbeck where the newly designated Green Belt is now 460 hectares larger than it previously was The largest reduction in Green Belt area was in Manchester where 400 hectares was released for the expansion of Manchester Airport. Last year, South Gloucestershire, Rochford and West Lancashire adopted new Green Belt designations that reduced the size of their local Green Belts by 1%, 2% and 0.4% respectively. In the case of West Lancashire, where the council has released less than 1% of its Green Belt, it is intended to deliver more than 1,000 new homes, new university buildings and 10 hectares allocated for commercial development. 12
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Brownfield: key facts 7 10 out of every new homes is built on Brownfield land The latest figures on land use change show that between 2008 and 2011, 72% of new homes built were on previously developed land, i.e. Brownfield. This was slightly down on the 74% built on Brownfield in the period 2004-2008 but the reduction is accounted for in the reclassification of residential gardens from Brownfield to Greenfield. Measuring like for like, the period 2008-2011 actually saw an increase in the proportion of new homes built on Brownfield land. Greenfield: key facts The volume of land changing to residential use that is previously undeveloped, i.e. Greenfield, is at near record lows. The reclassification of residential gardens as Greenfield has resulted in a small increase since 2010. 14
Business environment for small and medium-sized Politicians at a national level have rightly given a lot of attention lately to the current operating environment for small and medium-sized house builders. Since 1988, the number of developers building up to 100 homes per year has fallen by 78%. This timeframe coincides with an increase in the risks and costs associated with the planning system. In recent years the availability of finance has also become an issue of concern for SMEs. It is extremely important that there is a diverse range of house builders operating within the industry. Greater pluralism does not just benefit homebuyers by increasing the range of products on offer it helps to insulate the market from external shocks and boost overall industry capacity. HBF s work with government ministers and officials has led to a number of initiatives and policies in recent months. The Government has recently confirmed a new exemption from S106 affordable housing contributions for sites of 10 units or less and is currently consulting on a similar exemption from the full off-site requirements of the Zero Carbon Standard for such sites. The 525m Builders Finance Fund, announced at the HBF Policy Conference in April 2014, was another example of the government s attempts to support the acceleration of smaller sites and in doing so give a boost to SMEs in the industry. Whilst initially this was open to bids for developers for sites of 15-250 units, on 28 November, the Secretary of State for Communities and Local Government, Eric Pickles announced that 25m of this funding would be specifically earmarked for sites of 5-15 units. At the Autumn Statement, delivered on 3 December, the Chancellor announced a number of further measures to streamline the planning process which will have a disproportionately positive effect on SMEs. Little detail on how proposals such as ensuring that the principle of development is established just once during the process and 15
Planning More than two years on from the introduction of the National Planning Policy Framework (NPPF), 59% of local authorities have now formally adopted a Local Plan whilst another 20% have published a Local Plan. The planning process is still seen by many as an obstacle which developers must cross before they can begin delivering housing rather than a positive framework for development. Over the last year, following concerns voiced by the industry, the government has acted to introduce provision for the deemed discharge of certain planning conditions and at the Autumn Statement 2014, proposals to further improve the planning process were announced. These include: Ensuring that the principle of development need only be established once during the planning process Quicker negotiation of S106 agreements Streamlining CPO rules Neighbourhood Planning Neighbourhood Plans were introduced by the Localism Act 2011 Over 1,200 communities have expressed an interest in producing a plan (Hansard, 20 October 2014) Just under 1,000 areas have so far been designated 48 plans have been examined with 37 referendums having taken place 16
Space standards Following the Government s Housing Standards Review, ministers announced plans to introduce an optional national space standard that local authorities can seek to adopt in their future local plan policies. HBF argued that if the Government was determined to press ahead with this it must give very careful consideration to its impact on the range of homes available to the market and their affordability for purchasers. The government s final decisions on the detail of the revised standards regime proposed and the planning policy considerations that should control its implementation locally are due to be confirmed ahead of the election in the New Year. David O Leary, Deputy Director of External Affairs. If you have any questions relating to anything in this document or would like any further information about the HBF please call 0207 960 1600 or email info@hbf.co.uk. Alternatively you can visit the HBF web site at www.hbf.co.uk. Follow us on Twitter at twitter.com/homebuildersfed