The announced formation of a National Housing Bank marked the latest in a pacey series of positive steps to boost housebuilding in England. It comes on the back of radical changes to ease the planning system with the new National Planning Policy Framework and follows hard on the heels of the Spending Review announcements on funding for affordable housing.
Together, these three initiatives put in place some key building blocks that should drive a return to growth in the housebuilding sector after the challenges of recent years.
The National Housing Bank should help to plug the funding gap that currently leaves many good schemes stalled. Development is a risky business and a lack of certainty over returns alongside recent cost inflation and interest rate rises can make finance expensive, if indeed it can be found at all.
This is particularly the case for large, complex regeneration and mixed-use schemes that dominate the pipeline in larger cities.
In London, some of the funding may be devolved to the Greater London Authority and other Mayoral Strategic Authorities. The opportunity for local areas could then be to set their priorities through the proposed Spatial Development Strategies that come alongside local government reorganisation and then back those up with funding to unlock development.
While cities like London and Manchester have been highlighted by the Government, the implications for the urban areas in the Central South region are equally significant.
Government enthusiasm for large sites, including urban extensions and new settlements, needed to be backed up with a funding commitment, particularly support for infrastructure provision, as we identified in large sites research. Big sites tie up large amounts of capital for long periods of time, and there are only a small number of players bringing forward sites on this scale. More sites will require these organisations to grow and new entrants to come in, and both will be looking for funds.
Increased support for SME housebuilders should help to drive greater diversity in the housebuilding sector. Delivering more homes will require greater diversity of product, location and approach, and should be an opportunity to turn small builders into medium ones and encourage entrepreneurship.
One of the many questions arising from the Spending Review announcement of a new £39bn 10-year Affordable Homes Programme (AHP) was what the grant rates would be. Will the grant per home cover the whole cost of the subsidy required to offer homes for rent at a discount to market levels? Or would there continue to be a need for cross-subsidy from registered providers’ existing businesses, which are heavily financially constrained?
The £2.5bn to be deployed by the new Bank in low-cost loans for affordable housing may be intended to plug that gap, topping up the grant in the short term. That would accelerate the effect of the new AHP on registered providers’ appetite for development.
Jonny Kiddle, head of Savills South Coast Development, says: “The creation of the National Housing Bank, alongside planning reforms and new funding commitments, could be a game-changer for the urban centres in the Central South — unlocking stalled regeneration projects, supporting SME builders, and helping deliver the affordable homes the area urgently needs. There are many stalled regeneration projects in the region, many of which would benefit from public sector intervention. The National Housing Bank, together with devolution, will hopefully shine a spotlight on these projects and provide support to get them moving.”
