The Prime Minister, David Cameron, has announced that the Government will ‘directly commission’ 13,000 new affordable homes, and will call on small house builders to construct them. The first wave of the new commissioning policy will start later this year on five sites, four of which are outside London.
Cameron described the initiative as ‘a radical new policy shift not used on this scale since Thatcher and Hesseltine started the Docklands,’ adding ‘today’s package signal a huge shift in government policy. Nothing like this has been done on this scale in three decades – government rolling its sleeves up and directly getting homes built.’
The policy will be backed by a new starter home fund, worth £1.2 billion, which will help prepare brownfield sites for construction. This is planned to lead to the creation of at least 30,000 new starter homes and an additional 30,000 market homes on 500 sites across the country by 2020. This will count towards the government’s target of 200,000 new starter homes by the time of the next general election.
Reaction from the industry has been mixed. Daniel Farrand, Planning Lawyer at Mishcon de Reya, says: ‘While these measures are a good means of boosting the small builder industry (subject to state aid and procurement rules), it is worth remembering that these are houses that the government was building anyway. One could also argue that giving house-building contracts to small or medium size developers won’t actually mean that those homes are built any faster or any more cost-effectively than they could be by larger developers.’
Likewise, John Healey MP, Shadow Housing Secretary, argued that the announcement was largely spin and a rehash of similar promises made last year, saying: ‘Today’s statement promises no new starter homes beyond those already announced. With home ownership down to the lowest level in a generation, and fewer homes built over the last five years than under any peacetime government since the 1920s, David Cameron needs to do much more to fix his five years of failure on housing.’
The Federation of Master Builders (FMB) were largely positive, with their Chief Executive Brian Berry saying: The availability of small sites is the greatest barrier that SME house builders currently face when delivering new homes, which is why the Government’s initiative to make public land available to small builders is so welcome. The Government clearly recognises that we need to bring more small house builders back into the market if we have any hope of addressing the housing shortfall. Directly funding developments on publicly owned land, with planning permission already granted, should encourage growth of smaller builders and new entrants into the market.’
However, Berry has also been quick to warn that dividing the land into small parcels will be the key to success: ‘The public land that is being made available through ‘direct commissioning’ must be broken down into small and micro plots wherever possible. As the Housing Minister himself has recognised, the smaller the site, the quicker it will get built out. If the Government wants to truly tap into the potential of SME house builders, it should bring forward a wide range of packages of land, including those attractive to the smallest of developers, thereby improving both capacity and speed of delivery.
‘As positive as this development is however, it remains only one piece of the jigsaw. The on-going skills shortage is as pertinent for local firms as it is for larger contractors. We desperately need more skilled tradespeople in the industry, otherwise even supportive plans such as those announced today will be challenging for builders to deliver. Boosting apprenticeship training among construction SMEs will be crucial to this.’
There has also been criticism that the sites chosen for the incentive are in the South of England only, with developments planned in Kent, Cambridgeshire, West Sussex, Hampshire and Hammersmith. This detracts from the promise of the government to create more jobs and houses in a series of ‘Northern Powerhouses’.
One thing is certain, however. This announcement will at least to begin to streamline the planning permission minefield by short-circuiting some of the bureaucracy surrounding it. This system seems at odds with the government’s pledge to devolve power to local authorities – the central government will now be able to impose their own ideas above and beyond the plans of local councils.
For a Conservative government to start a new year by centralising – almost nationalising – the construction industry is a surprise, but it is a plan that, if it works, could go some way to improving the fortunes of SME builders and the entire housing industry.