Earlier this year, the Government’s Housing White Paper included many proposed commitments and policies, but what will, in my opinion, be crucial in 2018 is the idea of “diversifying who builds houses” across the country, writes Nicola Rigby of GVA.
In 2018, we will continue to see pressure within the housing market. In addition to the wider macro-economic discussions around inflation and interest rates, with it now just being a matter of time before we see an increase in the latter, a significant factor will without a doubt be the continued pressure on supply.
This issue of diversity is a key part of the answer, and should largely be about mobilising the SME market, but looking ahead to next year I think the emphasis should be much more on both the public and quasi-public sectors and their capacity for the direct delivery of houses for open market sales.
Without oversimplifying the matter, the public sector in its widest definition has arguably unrivalled access to land, both through its existing asset base and its ability to take risk through its covenant strength.
By and large, it also benefits from access to finance through the Public Works Loan Board and existing Government funding streams. It is therefore natural to see increased pressure on the sector to intervene directly in the market – and was certainly the sub-text I took from that particular phrase in the White Paper.
The question into 2018 is whether or not this pressure will result in increased supply. It seems like the answer should be a resounding yes, unfortunately I do not believe it will be quite that simple.
The public sector’s seemingly unrivalled asset base is still not fully understood, either in extent or potential, and its willingness to take risk is not consistent and is often politicised at a local level. Where local authorities and Government departments are willing to take risk in direct delivery this naturally needs to be determined to be reasonable.
It is this consideration of risk that brings us back full circle into the wider debate. So, to answer the question on supply we need to first answer whether the public sector can understand or mitigate risk without thinking like the private sector?
In 2018, this debate will hinge on many factors, including an understanding of acceptable delivery rates and dispersed geographies, so as to not flood markets and overexpose the public sector. Another key consideration is that at present speculative housebuilding just doesn’t really exist on a large scale in the way it does in the commercial sector, because no company wants to build houses without people wanting to live in them.
Ultimately, in 2018 we need to and likely will see more direct delivery of housing by the public and quasi-public sectors. However, whether this will be as quick as the government hopes, and will ultimately be in a form that is much different (in pace) from the private sector and housebuilder market, remains to be seen.
Either way we are undoubtedly going to see a continued push for the public sector to continue to acquire land for the delivery of new housing in 2018 with the intention of direct delivery. My hope is that this will be undertaken considering these wider market factors – and alongside a thorough review of the existing landholdings across our public estate, which remains for me the missing piece of the whole jigsaw.
- Nicola Rigby is director of the planning, regeneration and development team at GVA
The North West in 2018 series features guest contributors looking ahead to next year and is published throughout December.