Jonathan Bunt: Necessity will create the solution for housing in 2018

Britain has a housing crisis and Westminster needs a solution. According to Jonathan Bunt it will require new approaches and, seen in the right way, there are key factors that could help councils deliver.

For many years now, local government has been a victim of its own success in dealing with an assortment of policy and financial challenges. The position of central government has, explicitly or implicitly, been to reward councils with more problems to solve on its behalf. The latest example of this is the broken housing market and, perhaps most specifically, the homelessness crisis.

I have written before about being underwhelmed about new announcements on social and affordable housing. However, we should, I believe, take hope from what the excellent Tom Murtha wonderfully refers to as the government’s “unambitious ambition” in that at least housing is a major policy strand for a Conservative government with four and a half years to run on its administration. It has to be seen as a positive move for housing to become a headline part of Sajid Javid’s role and for him to be secretary of state for housing.

I was expecting the coming year to be a relatively stable period at ministerial level given the arrival of Alok Sharma seven months ago who, encouragingly, was making a concerted effort to understand and engage with the sector.

Dominic Raab arrives as the fourth housing minister in three years and it will be interesting to see the impact on both the content and approach to the social housing green paper. It is to be hoped that there is a consistency despite the continued absence of continuity. Given her previous stint as a junior minister, Ester McVey’s return to the DWP, where she strongly advocated the bedroom tax, is a potential cause of concern.

The Homelessness Reduction Act comes in to force from April and is, comparatively, a progressive piece of legislation which seeks to extend the support available to those in need.

Of course, the funding allocated to councils for this is inadequate, at least in parts of the country, if not all, and will likely create an additional pressure in town hall budgets.

Forgiveness

So, what opportunities can be found in both this and the broader housing challenges facing us in 2018? And, are councils in a position to maximise them?

The key thing going in the favour of local authorities is that the government needs affordable homes to be delivered and, realistically, knows the scale required cannot be delivered within the sums committed. As a result, Javid and HCLG will have to give considerable room to councils to bring forward solutions that, in a different environment, it may have sought to close down.

The solutions to the housing challenge are not straight forward, or they would have been found already, and therefore necessitate the invention, or evolution, of new approaches.

When operating in grey areas, one of my first bosses in local government advised me it is “better to seek forgiveness than ask permission”. I believe that this applies for councils on housing, as seeking HCLG permission is only likely to cause it to substantially slow down and erode some, or all, of the innovation in the offer. Ultimately, this is not what the secretary of state wants. Both Javid and Raab want more homes and, specifically, more affordable homes in response to the housing and homelessness crisis.

The other major factor that will give councils more room to deliver new homes in alternative ways is that the government is inevitably going to have its attention drawn to the Grenfell Tower response.

This will also, as I reference below, have an impact on local government too but it will mean that the level of challenge and scrutiny on new ventures and approaches is likely to be lower. This does not, of course, mean that you shouldn’t get proper, professional legal and financial advice on solutions but merely that forgiveness, or even assent, will be more readily available.

Most importantly, local authorities have a running start at developing such solutions as many councils have already blazed a trail with assorted approaches to housing companies, affordable housing companies and development companies which are, and should be, seen separately.

What is encouraging is the growing awareness of the benefits of different approaches and their gradual evolution as the sector becomes more commercially aware.

Initially the focus was on making use of one-for-one right-to-buy receipts for the delivery of affordable homes. Heading into 2018, organisations are seeing the really positive influence that housing investment can have on their financial challenges beyond just mitigating waiting list pressures and future homelessness demand pressures.

As a result, councils are not giving away the current revenue and future capital value that can be achieved and this is reflected in the solutions that will be more prevalent in the next twelve months.

Assets

Central to this will be how local government identifies and uses its land and assets. The historic tendency to de-risk by selling for a capital receipt gives away control and potential significant value.

Instead, the aim has to be to identify areas from a potential development perspective and align to its holdings and that of other public bodies. An inevitable tension for councils will be with their role as the planning authority and how to reflect the need and demand for new affordable homes in  local plana. Let us not pretend that will be an easy nut to crack or one that will be resolved in 2018.

A positive — in both total cost and development lead time sense — is the generation of modular solutions that are now available. These represent an option which can establish high quality homes in a fraction of the time of traditional build, which is essential right now and, in many areas, also attracts grant funding. That modular homes can be moved to new locations relatively inexpensively makes them an excellent “meanwhile” solution for local authority land which has long term plans.

I’ve written previously for Room151 on the alternative opportunities to traditional PWLB funding that exist and, in the right circumstances, are more appropriate for investing in housing. It is difficult to foretell how that will hold over the next twelve months plus but, at the start of the year, it still holds true and, actually, the conditions are slightly more favourable compared to the time of that article.

Taking funding from such a route does have risks alongside the potential upsides which requires a greater understanding of the key moving parts of financial models, and what genuinely drives risk and performance. An example of this is how the local housing allowance and universal credit evolves and why the appointment of Ester McVey at the DWP matters.

Flexibility

Finally, what don’t I think will happen this year? I don’t foresee any significant increase in the building of council housing. The increase in the borrowing cap last year was a drop in the ocean of need for a major increase in the number of new social rent homes and there is little indication that a substantial, or wholesale, lifting of the cap is going to come in the next twelve months.

Additionally, where new funding has been made available by central government in recent times, the conditions attached to the money are often overly restrictive and stifle the delivery of new or innovative solutions. As shown more broadly, when councils are given flexibility, they consistently rise to meet the demands made of them.

On top of that, as noted above, councils have Grenfell to respond to. Any financial and, or, human capacity not already occupied on the continual aspiration for decent homes, is predominantly, and rightly, focussed on the response to the tragic events of last summer.

This is where councils that have established a development company are potentially in a stronger position. Whilst not a panacea to the housing shortage, that additional capacity and greater scope to flexibly bring expertise to the sector can provide real momentum in a year of challenge but also of opportunity.

Jonathan Bunt advises local authorities on investment, development and funding opportunities, particularly in relation to housing and regeneration. He is a former strategic director at London Borough of Barking and Dagenham.

Get the Room151 Newsletter