There is a major problem, in particular in London, for people who rent their homes. Many of them are reluctant tenants – they simply cannot get on the rising buyers market. It’s a major problem.
Yesterday Ed Milliband announced that a Labour Government would intervene in the market – effectively placing a cap on rent rises. He wouldn’t interfere with the initial market setting – but would attempt to benchmark the uplift and then apply this notional figure in annual rises.
So in order to make this actually work he would need to alter the basic terms of an agreement. As now, a tenant would be able to terminate a tenancy after the first six months, with one month’s notice. A landlord could only do so with two months’ notice and if certain conditions were met – such as the tenant failing to meet their rental payments, engaging in anti-social behaviour or breaching their contract in other ways. After the six-month probationary period, contracts would automatically run for a further 29 months – so a total of 3 years.
Milliband has suggested the RICS were helping with setting the average rises – something that has been denied by the RICS. This seems a little sloppy. I do know from the Institution that they do not take political sides. The RICS is apolitical.
I think this is a poorly thought out policy.
I have sympathy with those renting – and the inexorable rise in rents. But this is partly as a result of a lack of supply – and the market sorts that out itself. We do have a number of policies to provide more accommodation in the private rented sector. There are millions of pounds being currently placed in the market. Enough to make a difference. These investors and developers could easily be spooked by rent caps. Historically they have not worked.
What will potentially happen is that there will be a reduction in the numbers of houses coming forward. The market hates Government intervention and Governments of all colours think they can buck the market. In the majority of cases they simply can’t.
The Private Rented Sector – a changing….
There is a distinct smell of change in the air. For many years, as a nation, we were told that there was nothing as safe as bricks and mortar. Maggie Thatcher encouraged millions to buy their own homes. Renting was ‘dead money’.
Of course the fluctuations in the property market have seen record numbers of people either lose their homes or see an equity wiped away.
Many people didn’t figure on having to move as employment patterns changed. When you own a property that flexibility of moving is not quite the same. We seemed to have developed a stigma about renting. Although other European countries didn’t.
In 2003 we reached 70.9% home ownership, today that has shrunk back to 66%. 10.1% rented from private landlords in 2001 – today that is 16.5%. It is becoming less of an issue to rent – especially for young people who simply can’t raise a deposit.
Back in August The Montague report was published by the Government – that was a root and branch look at the private rented sector. In his introduction, Sir Adrian Montague said, “It’s clear we must encourage investment in the private rented sector, which has gone through a period of rapid growth and is now relied upon by millions of people. My review shows that the rental housing sector offers potential investment opportunities of interest to institutional investors. But real momentum has been inhibited by constraints affecting the supply of stock, the treatment of rented housing schemes under the planning system and the need to create confidence among investors.“
In response to the recommendations of the Montague report, the Build to Rent Fund has now been launched to stimulate new private rented housing supply and to provide opportunities for new institutional investment in the sector. It’s a £200m fund to kick-start investment.
As such it should be applauded. I’m involved in two schemes at the moment and I can see that this ‘new’ sector is long overdue.
Rentysomethings
There was a model in the UK, probably driven by Maggie Thatcher of aspiring to own your own home. We were encouraged to become property owners – not renters. Renting was for a short term only. It was certainly seen as a second-class system of living.
But things are changing – and have been for a while. 10 years ago there were estimated to be be 2.5 million houses in the rented sector – today it is thought there are 4.8m – nearly double. And the evidence suggests this is a growing market. In 5 years time there could be close on 6m houses…
Rent in the economy is estimated to be £48bn and this is estimated to rise to £70bn by 2017.
So why the changes?
Firstly, bricks and mortar aren’t quite the same safe investment they always were. We have seen some significant drops in value – or rather swings in value – from 2007 to today. Those with large mortgages and small amounts of equity have seen their own money disappear. Secondly, the cost of accessing the buyers market is now high – a 10% deposit on a £150,000 house (forget London for the moment!) is a huge amount to stump up! Parents usually provide the key!
But we are also seeing a bit of a shift in perception. Renting isn’t the social stigma it used to be. We have probably seen the market change as a result of the improvement in student accommodation. For some time the student market has been ahead of the private rented sector – spotting that people are prepared to pay a higher price for better quality.
So we now see some better quality rented stock – for grown ups. That model seems to be getting some traction. There are some new entrants to the market who see this as a massive opportunity – the likes of UK-R – who I am working with. We hope that they will have a pilot scheme in Nottingham soon. It will show a new way of living – and not a moment too soon!
The Laissez Faire approach to Planning…
In the last month or so the UK has been exercised by a new approach being planned for our Planning system.
The debate is whether the Governments proposals will allow all and sundry to build on the green and pleasant land. Some of the opponents of the system are suggesting that if the building is ‘green’ then you can build it. I don’t thing that is the intention, nor do I think that the ultimate legislation will actually say this. But the over-arching sentiment seems to be a presumption in favour of development…
In the last couple of days I have come across Almere in the Netherlands. It is an area set aside where the Planning is as wild as your imagination. You buy a plot (there are 600) and you then build your own home. And the rules are that there are no rules.
Some of the results are whacky. But the whole point is that the owners make their own decisions.They build what they want, not what Mr Barratt or Mr Wimpy tell you they you want. As a result the spaces they build are different. Our obsession with number of bedrooms is false economy – and I love this as a concept.
I have often wondered how I would approach a house if I were given a blank canvas. I think it would have big spaces – it would be open plan – I think, with some dens. But light is a critical thing – big windows, roof lights and the like. I like bright colours too.
But doing something here in the UK is fraught with difficulty – Planning does’t make life easy. So perhaps we do need a change in the system. And we need some areas like Almere where people can express themselves?
The housing problem….
When they came to power Labour had a battle cry, “Education Education, Education”. It became Blairs war cry.
They saw it as a way of improving the nation – a way of creating wealth, especially as manufacturing was pretty much low ebb. An educated workforce could work in the services sector – hardly the roots of Labour, but perhaps something that New Labour needed to become to shift the then incumbent Tories.
Kids though need somewhere to live and do their homework? And those who don’t may well suffer against kids who do. You can see where this is headed – the haves and have nots. Those with good housing allowing the education mantra tom come good and those without perhaps not?
Health is known to be affected by the quality of housing. Poor housing = poor heath.
The problem we are now seeing is that those trying to get on the housing ladder are struggling to do so. An average 3 bedroom house in my local area will set you back and it seems that most Building Societies are looking for a minimum 10% deposit. That’s £15,000 out of taxed income – and often beyond the reach of young people. It could take years to save – or a benevolent parent?
We may be seeing a generation who simply can’t afford to buy their first home.
The Government target for housing is 240,000 new homes each year – and this year it looks like there will be less than 100,000 built – adding to the growing shortfall. And shortfall generally means higher prices – so don’t expect good news any time soon.
The new mantra should perhaps be “housing, housing, housing”? It’s as fundamental as education…
The housing crisis solved?
By all accounts we have a housing crisis. Or if we don’t there is a train smash ahead – and we are heading into it.
We are not building enough houses. Government figures suggest we need 232,000 each year and in 2009/10 we built 129,000. Obviously the problem is compounded with time. Future generations are going to be “living in t’ shoebox in t’ middle o’ road” (the lucky ones).
So HM Government has come up with a whizz scheme. They have noticed there are a couple of empty offices lying around the place – making the skyline look untidy. Often on Industrial estates or in business parks they are obviously capable of making warm cosy homes.
So the Cameron & Clegg show are consulting the people. The document runs to a healthy 66 pages – but you really only need read page 7 – the rest are sort of belly button fluff. Warm and soft but pretty useless.
Page 7 sets forth thus…(my precis – to save you time):
Planning is always a problem. So side-step the planners. If you want to convert an office or light Industrial unit to a bijou residence, crack on. Don’t stop for the permissions. Just build – and you’ll get a pat on the back.
Sounds great. Especially the bit about side-stepping the Planners!
But is it really? It sounds ok to start – as there are some reasonable buildings with four walls and a roof. But the configuration can be difficult to remodel. Shared toilets are often seen as ‘poor’ by residents. Suspended ceilings aren’t gig in people’s lounges – nor are paper thin partitions.
But these can be put right. What can’t be put right is the location issue. We have ‘zones’ in case anyone hadn’t noticed. Zoning works to keep the uses apart (although I accept that there are some areas where we do have mixed use). Once we start on this route it’s a slippery slope – it’s not going to easy to go back.
Perhaps just simplifying the Planning process full stop would be better?
Shanghai – day one
I am glad it is a non-stop flight, but it is still a long time in the air – 11 hours. We were assisted by a 180mph tail- wind for much of the way.
Count the tower cranes game!
Sleeping on planes has never been a strong point – and last night was no exception. Three films didn’t really help either!
Our hosts in Shanghai kindly put on an airport transfer – but this deprived me of a ‘go’ on the fantastic maglev I went on last year. They also took us out to the Hotel where the conference I am attending is to be held. It is some way out of town – but this gave me an opportunity to see the vastness of this place.
One of the measures back home of the prosperity of a City is to count the number of tower cranes. Nottingham at the moment has a handful (I am desperately trying to count them in my head – but it has been a long night!) What I do know is that Shanghai wins in that particular competition – I counted 10 – in one housing development! Next to that were another 10 and so on!
The pace of development here is breathtaking.
I met up with Saffa Riffat from Nottingham University – who has now asked me to speak at the Conference I was just attending. So I shall need to write a talk in the next 36 hours! As the saying goes ‘no pressure’!
But for the meantime, I am back in my own hotel in the centre of Shanghai – unpacking and blogging (there must be a term for that?). I need to catch up on some sleep as I have been awake for nearly 23 hours…. I mustn’t overdo the sleep thing though because I need to fool my body into Shanghai time (8 hours ahead of the UK)….
Bad news for The Meadows in Nottingham
Yesterday it was announced that the long term scheme to redevelop The Meadows in Nottingham had come off the rails.
The Department for Communities and Local Government said it will now only fund housing PFI schemes that are under contract. And Nottingham isn’t.
Avant guard architecture in the Meadows courtesy Julian Marsh
Back in 2009 Nottingham City Council had a £200m PFI credit approved for the scheme – but had to prepare a Business Case. It seems that the Business Case has fallen at the next hurdle. In the post Comprehensive Spending Review, perhaps this is not surprising.
It is not good for The Meadows though – which needs some intervention. The scheme I saw involved redesigning Street layouts and replacing some of the poorer quality housing with new family stock. One of my clients Blueprint has an excellent scheme there and I blogged previously about Julian Marsh’s excellent home – pictured above. Both of these developments really were catalysts to the wider regeneration project.
It was a very long term plan – and one that I am sure will be revisited in less austere times.
As I heard this news I was actually in Derby for the launch of Derby’s £10m regeneration fund. It was launched at Derby College’s Roundhouse Scheme. I had never been inside – but had seen some images as the building has won various awards – regionally and nationally. And it is not difficult to see why. It is a fantastic regeneration scheme – bringing old disused railway buildings back into use. The treatment of the buildings is just brilliant. I loved it.
I was thinking of the lost opportunity in Nottingham at Castle College on Maid Marian Way – which I remain involved in. We missed the window of opportunity from the then LSC. It was no one’s fault – although the Nottingham Planners could have been more helpful. But the point is that this was a missed opportunity.
The lessons are easy afterwards – grab the money when you can – and make sure the processes are not lengthy! I am not suggesting the Meadows Team could have gone quicker – they probably couldn’t, but these slugs of cash are only going to be there for the short term at the moment. Sadly, it looks like Nottingham has missed out – again….
A big “green” impact
It goes without saying that the green agenda is massive. And no more so than in my particular industry – which it is clear can make a huge impact.
Last week I had a brief tour of the eco-houses at Nottingham University.
These have been built over a period of time and are now at ‘zero-carbon’ standard. One of the houses is Code 6 which represents the highest current standard that we can build to. But my real interest was in the E-On House which was built to replicate a 1930′s house – complete with brick walls, tiled roof and single glazed windows. It is a real-life experiment and phase one is complete – where a family lived in the house for a year. Phase two is now to carry out works to the house to retro-fit ‘green technologies’ to get to a zero-carbon standard. Another family will move in and they too will be monitored. This is to measure the effectiveness of the new technologies.
Housing accounts for around 30% of the UK’s carbon emissions each year so this is a massive potential market.
There are 21.5m homes in England according to the latest English Housing Survey published last week. And we are building new stock at between 100,000 and 150,000 units a year (depending on the state of the market). So even if all new housing were at ‘zero-carbon’ it’s not difficult to see that we are only scratching the surface of the carbon output!
The work being done at the University is therefore critical to finding how best we can improve the ‘older’ housing stock. Some of the measures are simple (fitting better insulation to lofts?) and others are more complex and costly (installing photo-voltaic cells).
Whichever route we go down – these changes could make a significant difference – and fundamentally save money….
Housing – a market on the up?
There have been some really mixed messages this week. I have spoken to two Architects about their workload and the general state of the market. Both indicated that the residential sector of their work had increased in recent weeks.
My charity Abel Collins contributed 4 houses to the 2009 total!
This is against the backdrop that the number of new house builds in England was at its lowest level since 1946 during 2009, according to the latest figures from the Department of Communities and Local Government (CLG).
Around 118,000 new homes were built in 2009, which is 17% lower than the number built in 2008. And this is some way off the Governments target to build 240,000 homes each year until 2016 – to satisfy the anticipated number of households.
Although there does seem to be an increase in demand (which may be better described as ‘interest’) I am not convinced that developers are falling over themselves to buy into land.
In fact my conversation with a London based Architect revealed an interesting change in how sales are being achieved. As an agent acting for a vendor of land it was our aim to try to reduce the number of affordable houses on a plot of land – as they had a negative impact on the value (in one case where I was involved the cost of providing the affordable housing was £5m – the resulting residual land value was only £7m). The ‘norm’ for provision depends on the Authority but is frequently cited as 30%. In London, according to the Architect I spoke to, on some of the schemes, 60% is being voluntarily offered as this is the only cash available. It looks as though we might be moving back to building Council Houses!
Yesterday Housing Minister John Healey on the announced a boost to housebuilding in England, confirming nearly £500million funding to build around 8,000 affordable homes across the country. He suggests that this takes total Government funding for housebuilding to £3.5 billion since June.
You can see the scale of the problem – the target is 240,000, we built 118,000 and the Government are going to ‘kick-start’ another 8,000 – so had that number been delivered last year we would still be only around half of the requirement…
As part of my blog earlier this week I did express my concern about our kids getting on the housing ladder. Maybe the affordable housing route is going to be the only way. And that means private renting (possibly through a Social Landlord) or through a shared ownership scheme.