The Subplot | Northern economic agony, sensible pricing, shared ownership

Welcome to The Subplot, your regular slice of commentary on the business and property market from across the North of England.

THIS WEEK

• Big plans for Greater Manchester, West Yorkshire, South Yorkshire, and the Liverpool City Region risk going nowhere or getting stuck. Does the government care?
• Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way

ARE THE NORTH’S CHANCES SCREWED?

Regional planning is a nightmare

Big economic plans, with statutory force, could boost Northern conurbations. Is it local political misjudgement that’s screwing this up, or government complacency about regional planning?

A mighty effort to plan for economic growth in the North – via various kinds of development plans – could be about to crumble. Is that because Northern cities are having bad luck? Are the cities over-confident? Or is government complacency to blame?

Spatial strategy soap opera

It’s all looking a bit grim. This week the one and only Northern development plan in progress – Greater Manchester’s Places for Everyone – faces another monumental test as its core policy, a northern growth corridor around Oldham, Rochdale, and Bury, is enduring a tough examination in public. The inspectors are asking questions about Green Belt release without which the growth area is a non-starter.

Who will pull out?

Meanwhile, the government’s row-back on mandated housing targets risks local councils pulling out before final approval (and remember, only nine of the 10 Greater Manchester authorities are on board after Stockport bailed). There’s a real risk that at least one more Greater Manchester council will flunk the final approval vote, due when and if the inspectors find the plan legally sound. Oldham gets a lot of mentions (their housing allocation would probably go down if they pulled out). Keep an eye on Rochdale too, says Strategic Land Group MD Paul Smith. “PfE requires them to deliver 22% more homes than their Local Housing Need, so withdrawing could see them reduce that number dramatically. Labour has committed to keep the implications of the proposed changes to national policy under review,” Smith reports.

Finger pointing, part one

The difficulties in Greater Manchester are – some of them – home-made. The 10 councils (now nine) adopted a high-risk, high-reward strategy by going for a joint development plan (meaning, they write one big plan instead of 10 little ones). The advantage is detail on sites and land allocations, and the chance to shift housing and growth from one council area to another – so if the suburbs don’t want housing, the homes can go to the inner city where they are welcome.

Liverpool’s alternative

But this isn’t just a Greater Manchester problem. The Liverpool City Region is trying something similar but has been watching the shenanigans in GM and opted for a low-risk, low-yield approach. Its spatial development strategy, now in preparation, will not go into the detail in the way GM’s Places for Everyone does. It will work more like the high-level London Plan, Mayor Sadiq Khan’s grand spatial planning document, which depends for approval pretty much on him alone. The Liverpool City Region plan needs less buy-in from the councils – just unanimous consent from council leaders – so is less vulnerable to a surprise Stockport (or Oldham, or Rochdale) style withdrawal.

Yorkshire: tumbleweed

West Yorkshire is more complicated: the region negotiated additional strategic planning powers in 2021 but since then it’s all got a bit sticky. The city region is holding fire pending clarification from the government. South Yorkshire has a strategic economic plan, with the aim of adding £7.6bn to GDP by 2041. But it’s just a wish list. In any case, it could be in trouble: Labour-run Sheffield paused its development plan process in 2021, citing uncertainty over government housing targets.

Local leaders play safe

All three of those city regions have chosen to be less ambitious than Greater Manchester – maybe wisely, but it could do them damage. “Should Greater Manchester have been less ambitious? No, everyone bought into it – it was the right idea. The other city regions get certainty, and its quicker and easier, but the GM approach offers greater benefits,” says Gerald Eve’s Harry Spawton.

Why it matters

Progress on their plans matters in all four Northern conurbations. Locally, the absence of a clear plan really screws things up. In Greater Manchester some councils paused their own plan-making processes in order to wait for the completion of PfE – which is sensible and logical, but can leave huge gaps and that’s a problem. Already, five of the nine boroughs have missed their housing targets and don’t have the required five years potential pipeline. Supposing Places for Everyone is approved in 2024, it will be another few years before some boroughs have a new plan agreed. “Waiting years for Places for Everyone has caused a real block at borough level because plans are so far out of date. That’s the big issue,” says Spawton.

Jigsaw pieces

The problem of getting borough plans to match city-region plans is less acute outside Greater Manchester, but still real. West Yorkshire Combined Authority is currently nudging away at Leeds, as it prepares its development plan. There is scope for tension and missed targets.

Here comes the government

More generally, the government’s tinkering with housing targets in 2021/22, and their apparent abolition in 2023, has undercut the already fragile regional plan-making process. And fragile is the word. Attempts to agree a West of England joint spatial plan around Bristol floundered twice (they tried both the GM and Liverpool approaches, and both failed). Ditto for the Oxford-Cambridge corridor.

Finger pointing, part two

Where does the finger of blame point? A senior planner piloting one city region’s plan tells Subplot: “Whatever happens in Greater Manchester, they did well to get this far down the road. So many similar plans have failed much earlier, and if you want blame, point to the government. The National Planning Policy Framework is incredibly quiet on these kinds of regional plans and the government really isn’t being helpful.” This view is widely shared in the private sector, too. “If the government were serious about regional growth, they would do something about this gap,” says Matthew Dawber, associate director at Barton Willmore, now Stantec.

Nobody doubts that these regional plans would and should make a real difference to regional growth. But it is equally clear that the process is either high-risk/high-reward, or low-risk/low-reward, with the easy option getting most traction thanks to political jitters in city-regions and a complacent approach from government. It really is no way to run a regional economy.

ELEVATOR PITCH

Going up, or going down? This week’s movers

Shared ownership is going down, down, down to the basement loading bay, while hopes of realistic pricing of commercial property rise, just a little.

Realistic pricing

As the new year turned, Aviva sold the Manchester Corn Exchange leisure scheme for £43m in a deal with a Middle East investor. A bitter-sweet moment for Aviva, who paid £67m for the scheme in the pre-crash, pre-Covid, pre-everything market of 2005, and then spent £30m doing it up between 2015 and 2017. They’ve had plenty of rental income in the meantime, about £2.9m a year recently, so let’s be careful with the grim conclusions, but net it out and something like £35m-worth of capital went south.

A good thing? Not for Aviva, obviously not – although it does have the joy of knowing it is out of a volatile sector and out of a fund – its UK Property Trust, which Aviva very much wanted to close. But for the market, a big yes. Valuations needed to come down sharply and it is in no-one’s interests for inflated prices to weigh heavily on balance sheets. Aviva took a hit for the team.

Shared ownership

So, goodbye shared ownership. At least that’s what it looks like now that the government has cancelled a call for fresh ideas on how to boost the niche housing tenure. Shared ownership has always been a bit of a problem, one of those superficially good ideas to help lower-income people onto the housing ladder that are actually bad ideas and stand in the way of better ideas. Today, it accounts for just 202,000 UK households out of about 20 million.

But the idea is a turkey. Unless your wages and/or borrowing capacity go up faster than house prices (which they never will) shared ownership means you can’t ever afford to buy more of your house. And if you sell your share, trading up won’t work because you only get your share back, which won’t be enough to buy another larger share in another house – unless your borrowing capacity has gone up sharply. So as a route to home ownership it’s a dud, an expensive illusion, or both.

Get in touch with David Thame: david.thame@placenorthwest.co.uk