New London Architecture

Can housing in UK cities become genuinely affordable?

Tuesday 29 October 2024

Prof. Greg Clark CBE

Senior Advsor
NLA

Greg Clark reflects on our latest webinar, where industry leaders discussed challenges and solutions to make UK housing affordable, aligning with the government's housing goals.

There is almost no conversation about the future of any city, let alone the collective future of all cities, that does not refer to housing, its supply, and its affordability. Cities, it seems, are victims of their own success, they attract population but can’t house them, they are at risk of entering a doom loop. They struggle with deep path dependency, or lock in, rife with vested interests, dominant models, narrow innovation landscapes, and long-term leadership/policy failures. Housing attainment, and climate change transition have become the litmus tests of whether we can make our urban age work.  

Housing is a public amenity that should be a right for all (after all, Shelter is the fundamental in Maslow’s hierarchy of needs). At the same time, it is a private good that is mediated through complex market dynamics. Those markets are driven by owner and occupier interests, developer and investor returns, complex land-use rules, differential infrastructures, amenities and services deployments, the turns of the business and investment cycles, under-utilised assets, and the failure to grasp the full medium-term consequences of investment deficits.  

The fact that housing is seen as both a public good and a private good is the key to starting to unravel the complexity. 

It is interesting to note that the two cities worldwide that are most recognised as having the best housing policies are Singapore and Vienna. In both cases there is public investment and influence in more than 70% of the total housing stock, there has been consistent investment for 60 years or more, they are continuously building high quality well-connected new towns and districts, they employ medium or medium high density in cities with multiple centres, and they have active neighbourhood policies. Both cities are growing their population and diversifying their economies. Both cities are multi-racial and cosmopolitan in their own ways. Both cities recognise income inequality and have active social and welfare policies. Both cities have strong governance models that produce integrated planning and investment. Singapore is a City, a Nation State, and an Island. Vienna is a city, and a state, in the Austrian Federal system.      

With this backdrop NLA convened 9 panellists and a virtual audience of c 400 people on September 5, 2024 to debate whether, and how, housing in UK cities could become genuinely affordable? 

We started with tales from two cities. London and Liverpool are different cities in many ways. Both iconic and well known, with different economic fortunes over the past 40 years, but both locked into the UK and its housing trauma. 

London. 
 
Kate Webb began the discussion for the Greater London Authority. She sees London’s housing agenda as extraordinarily challenging. The GLA wants to address affordability in all aspects of housing, and needs to deliver 81,000 affordable homes a year. The range of challenges and issues faced is vast:  
 
  • Macro-economic challenges: inflation, the cost of borrowing, rising construction costs, labour shortages. 
  • Infrastructure deficits such as big ticket transport projects not being funded. Crossrail 2, Bakerloo Line Extension. 
  • Electricity and utility capacity being limited 
  • Complexity of the sites that can come forward.  
  • London landlords have real trouble with improving existing stock - safety, raw materials, institutional bandwidth. Struggling to maintain their appetite for new buildings alongside maintaining this stock. 
  • The narrow range of house builders and limited industry capacity.  
 
Most of these issues are well beyond the direct control of London’s Government and require more than local policy initiatives to address them.  As Kate explained, London’s Government is active in many ways, but multiple interventions would be required to create a comprehensive set of solutions.     
 
Kate described how the London Affordable Homes Programme is working to be as flexible as possible with increased support and flexibility from the Government. She argued that attention is needed to help landlords with their existing stock and to access the building safety fund. Borrowing costs are still difficult for the social and affordable housing sector where more predictable and lower cost borrowing is needed. Referring to the section 106 planning gain systems she suggested we need a fundamental reset of the model. She anticipated a more proactive and intentional approach with greater collaboration between national, city wide and local initiatives. She suggested that there would be concerted push on the transport infrastructure needed to open up new sites, more detailed work on how the London Plan can support the creation of 81,000 home a year, and potentially new forms of interventions such as additional Mayoral Development Corporations, land and site assembly, and a more active role by City Hall to de-risk sites.  
  
Liverpool 
 
Nuala Gallagher led the discussion for Liverpool. She started with recognition that although Liverpool is very different market to London and is overall more affordable, and does have developable land in the city centre, it suffers from the same macro-economic and industry challenges as London does, and because it is a less profitable market for investors, there is a greater challenge to attract capital. 
 
She also indicated that the new Government is seen as positive on infrastructure investment, and the possibility of new powers for the city on investment, land assembly, CPO, and brownfield reclamation. She indicated that Liverpool has a wide range of land available, but many sites are stalled and require complex interventions. it is easier for developers to go to greenfield sites outside the city. This can undermine the city as a place for work and other investments. Nuala also highlighted construction skills shortage as a major issue. 
 
Homelessness is a critical issue in Liverpool and costs have shot up from £1.4m in 2019 to £21m in 2024. There are 2,800 homes coming forward a year in Liverpool, with a large proportion being built to rent (BTR).  For Nuala a key challenge is how how to get more mixed tenure schemes on larger sites and the need for RPs need to engage earlier on in the process. Many PRPs have land but capital has been spent on refurbishment since Grenfell. 
 
Panel Debate 
  
We transitioned to a panel debate with two key questions:  
  • What is the nature and character of the challenge and the cost of not fixing it? 
  • How to fix it? What are the promising practices or innovations that need to be scaled? 

Sophie Rosier highlighted that for every 100,000 homes built, the economy adds 200,000 jobs and c 2bn in tax revenue. Their cost of not delivering the housing is to forego the jobs and taxes, and to lose the talent that follows the jobs. The only solution she foresaw is from collaboration between the public and private sector. She saw the need for substantial increase in new housing across all sectors, types, and tenures. 
  
Ian Mulcahey argued that we are in denial. It is primarily an issue of supply failures increasing prices. He ventured that we don’t view the problem clearly. We are 4.5m homes short right now across the UK. With another 10m people joining over the next 25 years we will have 8.5m people without a home. That’s another London. It’s another 17 Liverpools, or 2 Londons, to meet both the current backlog and the growing population. Ian argued for fundamental change. We haven’t been building in need since pre-war. It can be solved if we plan for and deliver what we actually need. 
  
Jamie Smith proposed that we can’t fix this by pulling little levers. We need a whole of market approach. It needs a national agenda and a national effort that recognises who is best to lead on delivering social housing. He argued to address the total spectrum of housing tenure. Housing has a key role in stimulating growth and GDP.  
  
Stephen Workman highlighted the impact of housing on health and wellbeing. He argued we must try to reduce dependence on temporary housing to reduce costs, increase investment and improve health. 
  
In our vibrant online chat, our audience were coming up with their own ideas: 
  • Employ more Modern Methods of Construction 
  • Produce more Intergenerational housing as a solution to wider issues 
  • Make land assembly more transparent. 
  
Alicia Egan observed that there had been 17 housing ministers since 2010! Each of them had their own short-term initiatives. The housing sector can’t respond to this kind of short-term thinking. Local Authorities are being bankrupted by the cost of temporary accommodation. Her authority was spending £96m per month on temporary accommodation. She spied opportunities to work together on land assembly where there are clearly opportunities. LB Bromley are only just delivering housing stock again after 35 years of no construction, they are using MMC. The cost of solving the problem is much less than the costs of not solving it. 
 
Ben Williamson highlighted that the core of the problem is that too many people do not have somewhere to live. 1 child in every classroom in London does not have somewhere permanent to live. For people it is their entire existence. There has been an over-reliance on the private sector but large-scale delivery requires a public/private effort. To speed up delivery we need clarity, certainty on what will be consented, what standards will apply, and clear rules and regulations. 
  
Paul Karakesevic took a different tack. It’s not a supply side issue, he countered. There is stock everywhere, but it’s under-occupied. £32bn of public funding goes into private housing every year, which props up the market and fuels massive inflation. The result is that we are building housing in the wrong places. We should switch to investing in housing in the public sector. We must reform procurement and tackle corruption. We are spending more on MEP in our flats (£60-70,000 per flat) than it takes to build an affordable home in Barcelona or Paris. MEP contractors are hoovering up the funds. We need to design simpler, adaptable, housing that is cheaper to build. Subsidy should be towards the social sector, not the private sector. 
  
We came back to our city reps for their reflections: 
 
Nuala added that they have 9000 void properties in the Liverpool. She wants the CPO powers and funding needed to retrofit. More money should be directed to the Local Government for land assembly, and the infrastructure required. She reiterated the challenge of extensive brownfield sites that require working with the landowners that want to remediate and redevelop. To do this at scale needs better frameworks to get deeper partnerships with developers. A key issue was to densify and increase height properly. She wanted to do MMC at scale and be innovative with it. 
  
Kate added there is a widespread recognition that there is a role for public private partnerships here. New ways to de-risk schemes with a genuine conversation about what a lower profit share can generate are required. In London, she confirmed, 1 in 23 children are in temporary accommodation. Homelessness results from weaknesses in the Private Rented Sector. Rental Rights Bill progress is needed. Clarity is needed on the role of build to rent sector, and how it can support wider housing delivery. Some boroughs are unsupportive. We should think creatively about what type of build to rent we are delivering - it is very mono-tenure at the moment. We develop different models in different locations. 
  
How to fix it? What are the promising practices or innovations that need to be scaled? 
 
Paul focused on longevity of housing. Every single house and home should at a minimum be capable of lasting 200/300 years. Everything that we build with the public purse has to stand the test of time. We must plan for the future generation. Build beautifully, and with better maintenance. There are benefits of using design for manufacture which are making beautiful, intelligent products. Avoid modular containerised housing, with a lifespan 15-20 years. 
  
Ben agreed with Paul, the industry has a massive blind spot when it comes to longevity. Simplicity of what we build is key to buildings lasting longer, not just building quickly. More universal approaches to home design, not designed for people with particular tenure/mobility needs but can be lived in by all. Multigenerational homes built in London in Chobham Manor, where typologies can be more flexibly used. Getting rid of the right to buy means we can maintain these homes 
 
Alicia highlighted that 87,000 homes were registered as empty last year, and a new approach is required. If we bring existing housing into new use, we have to pay VAT. We need to reform VAT on retrofit. She asked why we are providing social housing properties for life if incomes change? We need means testing in a more dynamic way. 
  
Stephen wanted to address the length of time taken to deliver a new home in the pre-war period compared to now. We need to be more transparent with each other, more trust to build more homes more quickly. 
  
Jamie echoed the point, partnership working needs to be based on trust and deeper collaboration. We need to unlock private sector investment to unlock public realm, schools, amenities that also makes them a return. Everyone has spoken about the link between housing and infrastructure, we need to invest in ways that deliver both.  
  
Ian agreed that empty homes across the UK should be an area of focus, but it’s still a small proportion of what the need is. The scale of the problem, he argued, isn’t about suburban housing. It’s about building cities, with employment spaces, schools, hospitals. New towns or new cities will need to be the direction of travel to solve this problem. For new towns, the UK Gov borrowed over a very long period of time, and made a good return when sold back to the private sector. It’ll be a re-cooking of the new town development model. But the land needed is now in competition for energy production, rewilding, and other objectives. 
  
Sophie reflected that supply is only going to come through delivery. How we unlock delivery of these key sites will be essential. She also raised the need to address international ownership. We are reliant on global investment coming into our cities, so we need to manage this well.  
 
So, all in all it was quite a discussion. Three things echoed from the this: 
 
First, people are passionate and very concerned about housing in UK cities. It is not simply a ‘sector’, housing underpins every aspect of our lives from productivity to health to inequality to talent attraction. It is the fabric of life, just as food, water, and safety are. This is clearly an example of a system that is broken, where no effective leadership has been shown by the Government for so long that the problem has become chronic, and the market players are all frustrated. 
 
Second, the interdependencies are such that it can’t be solved with housing construction policies alone. Even if the focus is on housing supply, that supply depends upon many other variables that are in the control of one system. The whole market approach needs a whole government leadership. 
 
Third, the opportunity is extraordinary if we can reset. That is not just to solve the housing problem but to win all of the co-benefits that will come from it, in health, climate, productivity, jobs, taxes, investment, and local growth.  
 
So it’s a problem worth solving.      



Prof. Greg Clark CBE

Senior Advsor
NLA



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