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An answer to the affordable housing crisis?
Published: 2010-03-10 08:08:38
"The question people are asking is where do you get more bang for your buck in difficult circumstances?" Jim Saunders, managing director of Regenter, an investor, operator and developer of housing-led community-based regeneration schemes, believes the answer lies in creating a new joint venture model.
"To do that you need to think differently," he told SocInvest.
One net effect of the recession has been to derail government plans to create three million new homes by 2020. Housing starts are the lowest since 1923.
But this is only part of the legacy: local authorities have inherited a housing development model designed for more prosperous times that no longer works.
"On top of that there is the budget deficit," said Saunders. "It doesn't matter what happens in the election, the problem will remain. As the private sector comes out of recession, the public sector goes into a period of austerity. With the next comprehensive spending review there will be more pain to come as housing budgets are cut back."
But Saunders believes that there is hope for bucking the downward trend by reinventing joint ventures. "Historically local authorities were reliant on doing land deals with builders and waiting for the disposal receipt."
Part of the solution is for public and private partners to take a longer-term position. "If local authorities are prepared to defer their land receipts and the private sector defers their development profit the cash cost of new homes is substantially reduced and the deferred interests of the partners acts as the stimulus for joined up, longer term thinking that will create value."
This model requires a different approach to funding and investment. "Arguably, the majority of local authorities remain too attached to the traditional retail housebuilding model as a means of delivering new homes. I think they should be engaging more with investor partners who are incentivised to procure the best development solution working alongside the authority." Winning support from institutional investors is, he pointed out, part of the HCA's current mission.
While this would address part of the PPP challenge, it is also time for a cultural shift in the approach of local authorities to the provision of housing as part of a community-building process. "Joint ventures focused on sustainable mixed regeneration change the dynamic of the whole community and provide all sorts of knock-on transformational benefits that tackle the effects of multiple deprivation," Saunders claimed.
"Local authorities understand the long term strategic needs of the community. This must be their prime focus; not the cash receipts. This requires integrated solutions. Once the local infrastructure and housing is in place, the very best service provision is needed to bind the community together and create somewhere people want to live."
Nor can the successful regeneration be achieved without other changes. "Procurement is an increasing deterrent for the private sector. At the moment there's a prohibitive four to five year cycle. The whole process needs to be much more efficient."
Driven by demographic trends and continuing economic difficulties, there is no let up in the pressure for affordable housing. "There are people who are trapped in sub standard accommodation. The 'bank of mum and dad' has suffered, with many children stuck at home in their 30s. Overcrowding is a big problem," Saunders said. "There is huge pent-up demand."
Whether workable answers can be found to providing the housing supplies needed will depend on what appetite local authorities and private sector partners have for embracing new ways of working together, Saunders concluded.
Jim Saunders speaks at the Affordable Housing workshop, part of SocInvest2010, June 16th, London.