2 Elephants, not 1 in the room?

Most of these blogs focus on removing the barriers to building enough new homes to release the economic growth the nation needs to preserve and increase national prosperity, so essential to deliver future voter expectations. But the changes needed will have consequences, sometimes dire consequences for many builders, developers, option holders and ,and owners as changing reality dawns. That means the existing building land supply system, on which their land assets assumptions rely for their value, as it cannot deliver the building solutions local communities will accept in the future and the government of the day, regardless of its political allegiances, cannot deliver the homes and infrastructure needed without radical change in the planning system, are no longer reliable.

it is worth noting that England’s economic growth, when compared with the USA has flatlined since 2008. Standards of living in the two countries were not too far apart in those days. Now we in England carry a 40% discount as the American economy surges and ours does not. This failure cannot go on.

It is also worth noting that the Chief Executive of the National House Federation, Kate Henderson, who represents many builders believes that it is good news, and exciting news that the new Starmer government with its big housing ambitions is on course to achieve its house building target of 1.5 million new homes by 2029. This is not my view without two radical systemic changes which will both impact her members. One, local councils must replace the haphazard call for sites system on which local plans are constructed with their own mandatory spatial policy for their area. And two, residents in host locations receiving at scale new homes must enjoy the benefit of rates subsidises paid for by residents of council areas which refuse to accept their share of new homes and infrastructure through rates precepts on their household council taxes. I know this is scary stuff. But after years of pondering I do not see another way to reboot our spatially dependant economic growth. The upheaval will leave behind losers, and I hope create lots of community winners in ten or thirty years time.

Which takes me to a thought provoking story by Joey Gardiner in Housing Today (11 November 2024) headed ‘How worried should the sector be about Vistry?’ Gardiner asks why the company has lost half its value after two profits warnings in two months. Reading the informative piece I could not see the answer. The firm sells most of its new homes to housing associations, local authorities or build to rent partners. The firm’s Chief Executive, Greg Fitzgerald says the problem is concentrated in the South Division and is a a cost projecting issue. Precisely what this means is not clear. We are not told. But my guess is it may be to do with past decisions about how much to pay for the land are now seen to be wrong. The price paid was too high. Land prices are highly volatile and are the one reliable symptom which tells the market that expectations are changing.

What am I saying? Simply this. Watch like a hawk the movements in land prices. They are by far the optimal indicator of future change. For example is the market for land factoring into it forecasts a new spatial regime of housing land supply? Or alternatively is the market saying that future housing unit prices will be lower than expected? The other big variable is building costs, but what is new here? They have skyrocketed as Brexit and immigration squeeze supplies, of labour and materials: but this is old news. It must be the other two. I wonder if Vistry’s woes are the first signs that a land supply market built on unsustainable spatial chaos will eventually be replaced by a land supply market that is designed to win local support for at scale house building that local residents welcome? I do not know. But I do know that if I were a banker I would think twice about the value of the collateral I am offered if it is secured on potential building land.

Ian Campbell

13 November 2024

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