Building consensus on London’s housing priorities
The housing market has the potential to play a significant role in the UK’s economic and social recovery from the pandemic – but housing in London faces a mounting number of challenges and uncertainties in doing so.
That was the verdict of a roundtable held as part of a UK-wide initiative by Lloyds Banking Group entitled ‘The Big Conversation: Helping Britain Recover’ – a series of virtual events convening policy makers and business leaders.
Hosted by Ed Thurman, the group’s ambassador for London, the ‘Rebuilding London – Providing Great Housing For A Great City’ event highlighted the importance of the capital, and its nine-million strong population, to the UK economy. But it also reflected on how it is increasingly a city of extremes where average house prices are 12 times average incomes and where homelessness has hit record levels.
Affordable homes are top priority
London requires 1.6 million additional homes by 2041 – about 65,000 new homes annually – of which two-thirds should be affordable, according to City Hall projections. Murad Qureshi AM, London Assembly housing committee chair, said the pace needed to quicken as the current annual rate of build is 52,000, adding “The key issue in London before Covid-19 – and continues to be – the supply of affordable homes.”
That view was supported by Mark Hattersley, chief financial officer at Clarion Housing Group, who said: “Affordable housing needs funding – there is no magic solution. We have to use the current hiatus to bring key decision-makers together.”
London can be ‘like wading through treacle’
Inevitably, the role of government was prominent throughout the Big Conversation discussion. Among the initiatives discussed were the ‘Help to Buy’ equity loan scheme, through which the government lends up to 20% of the purchase price (40% in London); and section 106 agreements between developers and local planning authorities on measures the former must take to mitigate the impact of new homes on the local community. Both initiatives’ futures are uncertain.
“Politicians have mixed views on Help to Buy. But it has definitely helped with the deposit challenge, in particular the London scheme,” said Lloyds’ head of customer development for mortgages, Andy Mason. He added that he was interested in how the Shared Ownership scheme – although more effective in London than elsewhere in the country to date – could be “transformed” to help people onto the housing ladder.
Metropolitan Thames Valley Housing executive director of development Guy Burnett pointed out that Section 106 agreements have been crucial for affordable housing. “How will [government] reforms affect this? Will it increase or decrease the amount affordable homes? It’s a bit of a worry,” he said.
Hattersley pointed out that London itself can often be a challenging environment for housing providers to navigate, saying: “We are big in London – and we are committed to working significantly in London. But I also have demand in Manchester, Liverpool, Leeds and York – and it’s also easier to work in some of those areas.
“In London there are so many issues, it’s like wading through treacle – we have to start addressing those. I think there’s a bit of opportunity now. But it’s a hard one to deliver.”
‘Huge appetite’ for investment in sustainability
The UK has among the oldest – and least energy efficient – housing stock in Europe. The opportunity surrounding retro-fitting older housing was front of mind for participants.
Canada Corporation external affairs director Giles French identified sustainability as one area for optimism.
“There’s huge appetite for investment from financial institutions in sustainable infrastructure,” he said.
“Part of the challenge is a lack of investable projects – some of the biggest funds in the world are desperate to direct capital towards these sorts of projects. London ought to be as good a place as any to champion and showcase what can be done on that agenda.”
Andy Hulme, Lloyds Banking Group’s managing director for real estate and housing, pointed to the Group’s Green Buildings Tool as something which could help drive sustainability in the sector.
“We are looking at how to incentivise builders and developers to deliver better-quality housing. We are also helping to educate and inform people in understanding a building’s green credentials and how to improve them,” he said.
But there was also empathy for home-owners struggling to see the financial benefits of investing in ‘green’ measures.
Lloyds Banking Group’s Andy Mason said: “To move from a ‘D’ to a ‘B’ [Energy Performance Certificate – EPCs] rating can cost about £10,000-£15,000 but savings are typically [just] £300-£400 a year.”
“I think we need a catalyst to help. The Government’s Green Homes Grant scheme is a really good start, but it finishes in Q1 2021. We need something that will work in the longer term, for example something like a stamp duty rebate if you ‘green’ your property.”
Finding skills for the future
Participants in the Big Conversation also emphasised the importance of skills and workforce issues. Given the relatively high proportion of non-British nationals working in construction, the uncertainty surrounding Britain’s future relationship with the European Union was a concern, while Hulme said a significant proportion of workers in the sector were approaching retirement age.
Guy Burnett said that construction was often not an attractive career choice for young people and said that this issue, combined with Covid-19 and Brexit, meant the industry was facing a “very difficult set of circumstances”.
More apprentices are required, participants agreed. “There needs to be more done to push and accelerate apprenticeships,” said Hulme.
He added: “We also need to ensure we have the right skills to deliver modern methods of construction. We’ll build houses differently in the future, but we have to find solutions that have skillsets alongside them.”
However, Murad Qureshi pinpointed retrofitting as offering opportunities for job creation, as well as energy efficiency.
“I think you can get a very good sense of satisfaction being involved in producing a unit of housing,” he said.
“It’s critical that we have skills programmes that are well-funded and targeted because we’re going to need it, more so than we realise. Those programmes will have to be upscaled.”
‘Shovel-ready’ projects? Look no further
The pandemic will inevitably impact everything from government funding to how people want to live and work. But the capital will continue to have a unique set of circumstances.
“If we want more affordable housing in London, the state has got to pay for it,” said London First’s Jonathan Seager. But these are challenging times for the public purse, in London and across the country. “So, if the state isn’t stepping up, what role is there for private investment, particularly institutional investment?” he asked.
Then, there is uncertainty about government planning reforms. “I think they have the potential to unlock development but there just isn’t the detail at the moment – it is still a very high-level picture. We are concerned that the promise is of simplification, but the reality might well be more complexity,” said Seager.
While the escape route from Covid-19 remains uncertain Murad Qureshi offered one reason for politicians to look benignly on construction as they look to drive economic recovery.
“Housing is one of the best ways of getting shovel-ready projects – they’re much easier to process than, say, transport infrastructure.”
The ‘Rebuilding London – Providing Great Housing For A Great City’ roundtable was held on 6 November, with Morning Wire the exclusive media attendee. It was chaired by Ed Thurman, Lloyds’ group ambassador for London and MD for global transaction banking. ‘The Big Conversation: Helping Britain Recover’ series findings will be published in a report later this year.