If a slump is on its way we need to give councils the freedom to snap up cheap land and build homes on it, says Martyn Evans
A friend who is never wrong on this stuff told me over breakfast a couple of weeks ago that we are heading for a significant downturn in the property market. Working in a business that operates on very predictable cycles, it didn’t come as a huge surprise to hear him say this. Of course, even though we’ve been there before many times, each cycle, especially the down-swing bit, has its own particular impact based on what came just before and the prevailing economic and political climate.
And what a climate. As the manner of our Brexit becomes ever more unclear and the knock-on political effects polarise the main political parties, it’s becoming more and more difficult to set out even a range of scenarios to enable sensible planning for the short to medium term.
When I pushed my friend to explain why he was so certain, he told me of a couple of deals he’d done recently to sell some property assets he’d bought just before the last recession and which he was only just now getting to a place where they could be profitably packaged and sold. He didn’t have trouble finding a buyer. “Too many people offering too much money,” he said. “Silly money.”
And so it goes – developers and investors, intoxicated from the confidence of a market upswing, fighting each other to put their hungry money somewhere. Anywhere. Not so long ago I had tea with a billionaire property investor visiting London from east Asia. His complaint about the property market in London? No schemes big enough for him to put his money into.
He wasn’t unhappy, my friend. In peril, he sees opportunity. I wouldn’t be surprised if he saw the properties he sold last month back on the market before too long, searching for a buyer, at a loss. When developers are shaking their heads at the prices someone will pay them for land, you know something’s wrong.
So what does all that mean for the problems we discuss daily in these pages? We know that the answer to our housing crisis is simple – build more homes. But where the principal driver for that growth is the private sector, delivery will always be subject to the sensitivities of the market. In good times, developers routinely challenge social housing contributions through viability tests. What do you think happens when the market gets tougher?
Last week, the think tank Onward announced a campaign in partnership with a coalition of housing-related organisations including Shelter to overhaul compulsory purchase rules. They want the government to compel landowners to sell land for housebuilding at significant discounts to what they see as unfair market value – that driven by uplift from planning gain. Not an ignoble suggestion. But, as ever, it would be the government tinkering at the edges of regulation as it relates to the private sector’s delivery of social housing. Make it easier for them to build market housing, the argument goes, and levels of social housing through section 106 contributions will rise. Except it goes the other way too: when viability assessments are challenging, social housing levels drop.
Local authorities across the country have vast land banks. Ex-industrial sites, failing town centres, green belt that’s not really green and bad housing stock that needs replacing. There’s enough. It’s time to stop tinkering at the edges with policies that assume the cyclical private sector has all the answers and allow local government to borrow and build. And if land has to be acquired – well, like my friend, they might decide it’s a good time to go shopping soon.