The markets responded positively to the news of a stable government.
After all, a majority government is good news for business – and should bring continuity to the property sector. Although months of political uncertainty are now over, the challenges facing our industry remain the same. The new administration will be under pressure to address what is possibly the worst housing crisis in post-war Britain. Population growth is stifling our cities’ ability to perform, particularly in the South East. Demand outstrips capacity – and people’s desire to live and work near cities will not wane.
Tackling brownfield development is an obvious place to start. In their manifesto, the Conservatives pledged to ensure that brownfield land is used as much as possible for new development. Local authorities will be required to have a register of available land, ensuring that 90 percent of suitable brownfield sites have planning permission for housing by 2020. The theory is sound. Rather than a dilution of environmental policy, it is a brave attempt to apply the technological advances in remediation to clean up the UK’s post-industrial sites. My concern is that Nimbyism and planning laws could slow down progress. Five years is a long time to wait for planning consent – our industry needs the green light to start building now.
A more comprehensive approach is therefore needed. Key to this is urgent action to reform the planning system so that the UK’s house-building programme can be accelerated. In AECOM’s manifesto for the London City Region, “Big, Bold, Global, Connected – London 2065”, we calculated that the growth in the region’s population will lead to a shortfall of one million homes by 2036 unless new sites are found and building is accelerated. The shortfall for the UK as a whole will of course be higher.
The Conservatives’ proposal to introduce a Right to Buy scheme for housing associations met with some criticism when it was launched last month. All eyes will be on the incoming government to prove that a new-build programme of affordable housing and low-rent accommodation can be delivered at a rate sufficient to increase public-sector stock. The reality is that a number of people will never be able to afford to buy their own property and they must be housed appropriately, with infrastructure to support them. It’s a chance for the Conservatives to show they don’t need the tempering influence of the Liberal Democrats to perform in a socially beneficial way.
As the austerity agenda progresses, expectations on the property industry to fund public sector house-building programmes are only likely to increase. In the public sector rental market, however, surely there is scope for local authority balance sheets to create new purchasing mechanisms. It could speed up the process if local authorities stood behind the asset while it was under development. Guaranteeing the loan for building would work from a securitisation perspective as the rental stream would be reliable given the high demand for good-quality public sector housing.
Infrastructure also plays a vital role in driving demand and creating value. Call it the Crossrail effect. This is where government support can drive regeneration and economic growth.
There is no simple – or single – solution to addressing the UK’s housing shortage. Radical thinking and brave new approaches are required. Politicians have to think the unthinkable to deliver on the scale the country requires. A majority government is best placed to make the necessary bold decisions to change the UK’s housing fortunes. Without decisive – and swift – action, there could be a return to conditions not seen since the Industrial Revolution. And that’s a legacy no government would want to leave.
John Horgan is Deputy CEO, EMEA & India, AECOM