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Beyond the Crunch

06 October 2008 | Colm Quinn

The panel debate from The Housing Forum's West Midlands Regional Conference.

Our 50 delegates took part in a lively and timely debate on the housing market downturn.

The session was chaired by Mick Kent, Group Chief Executive of the Bromford Housing Group, Board Member of The Housing Forum, and Chairman of The Housing Forum Working Group "New Management Models for New Mixed Communities".

Mick opened the session by setting the scene from his own perspective, likening the current turbulence to being in the "eye of a storm". This kind of occurrence is unprecedented, and organisations that seize opportunities in this time can create history. Mick's view of the downturn is that it is not a short-term - say 6 month - occurrence, but that the housing market will change "for good". Certainly the last 12 years of lower and lower grant rates, capital receipts and "stair casing" to pay for building has all benefited the Treasury - but a new model is now needed.

Bromford's approach has been to minimise exposure, ensure that as a company they understand their own financial exposure, and take opportunities to rationalise. In this climate, housing providers should also be rethinking their approach to accreditation of standards - in this regard The Housing Forum "Community Kitemark" is a proposal to adopt.

Some of the results from the e-voting session on the current state of the industry were:

73% of the audience thought the situation was going to get worse, with 40% saying it would get "much worse" and 37% "significantly worse"
43% thought less than 100,000 homes would be built next year
37% thought it would take 5-10 years for things to get back to normal, whilst 51% thought it would take 2-5 years
48% thought the effects were the same in the West Midlands to the rest of the country, with 36% saying it was worse off and 17% saying better off

The panel was drawn from across the sector and consisted of:

Rebecca Bennett-Casserly, Partner & Head of Residential - Affordable Housing, EC Harris
Eugien Jaruga, Director of Partnerships, Keepmoat
Dr Ashley Lane, Director, Westbury Partnerships - Persimmon
Matt Nichols, Business Development Director, Wolseley

The panel were asked first to address the question whether a broader mix of tenures will help us grow out of the present difficulties. Dr. Ashley Lane led the debate on this topic. The views were:

Underlying demand remains an urgent pressure. Pre-credit crunch, there was a variety of tenures available but this did not stimulate the production of any more houses. This year, there are likely to be 105,000 houses completed compared with 2006/07 when there were 169,000. More demand builds up and we need to have answers. In many ways, learning from other business processes is helpful - look at key strengths as a business. Housebuilders can add wider capability to the RSL sector. There are examples, e.g. Barking and Dagenham of private housing built to Code Level 4 (sustainability).
4 way partnerships - Local authorities, RSLs, contractors, HCA - may be the way forward. Funders could also be a further partner in this.

The condition of the existing stock is crucial and slow down is likely to pull the existing stock even further behind. This part of the panel debate was opened by Matt Nichols who highlighted the current situation.

Statistics from the 2006 Housing Survey Bulletin conducted by the Department for Communities and Local Government (published in January 2008) state that there was 22 million housing units in UK - 4 million social housing, 18 million private dwellings
37% of all private dwellings don't meet Decent Homes Standards & 33% of all social dwellings don't meet Decent Homes Standards - the target is 5%
The panel supported the call for greater action on the existing stock - calling for legislation to come through to promote improvement and registered their concerns that the UK is "years" behind in this regard.
Retrofitting existing stock was crucial and the panel accepted that this might be difficult but emphasized the direct connection between labelling and customer awareness raising.

Market rescue packages and the role of both industry and the Government was the next topic led by Rebecca Bennett-Casserly.

The way forward is principally about confidence and money supply - not really about initiatives. Starting from the perspective of housing as a necessity is the right way forward and concentrating on housing as an investment has distorted the market to the extent that there is now a shared view that the model is broken.
The perception of renting as "money down the drain" has been hugely unhelpful, "build to rent" is a viable option - and there is considerable corporate equity that could go into renting/equity share/first home buyers. The conclusion is that long-term "stewardship" and standards for management need to be taken seriously.
Money really isn't used efficiently - with wastage in the procurement process and new process introduced into pre-tender dialogue which is seen as a major drain on resources. The panel thought that sourcing from within Britain should be emphasized as there is great expertise in the UK - and it's important to keep it all together. Housebuilders and RSLs need to support the national supply chain.

The final debating point was how to "hold your nerve" and keep major regeneration schemes going. Eugien Jaruga kicked this one off.

Pathfinders, consultation, master planning - all the waiting and preparation, is starting to bear fruit. Agencies have credibility to keep momentum going, banks and building societies should invest as equity partners and build value in the long-term for future returns.
Despite the downturn, we should not rush to push in numbers of social housing - mixed estates and communities is a good model. Three ingredients are needed in particular - long-term models (10, 15, 25 years); embrace the cycles and be prepared to flex; keep stewardship in mind constantly.