The LGA represents over 370 councils, and wants a raft of new measures to tackle the problem. If nothing is done, it reckons that in a decade the total shortage would be the equivalent of the entire population of Birmingham. Key measures proposed include government incentive schemes to encourage private developers to speed up housing delivery; the creation of council-led local land trusts; the complete scrapping of the housing borrowing cap, and an overhaul of the government's Right to Buy scheme.
Taking each proposal in turn; speeding up delivery of housing on land that already has planning consent could include incentives to reduce up-front costs and risk by engaging in early discussions with developers; guarantees and phasing payments for infrastructure. Council-led local land trusts would have powers to pool surplus central and local government land and make it available on a 'build now, pay later' model. And removing the housing revenue account borrowing cap and replacing it with the same controls that govern any other council lending would provide a useful and additional source of finance. Reviving the Right to Buy rules would mean that all receipts from sales would be retained directly by the council to reinvest in replacement housing.
Another novel approach is for local authorities to provide land complete with consent to housebuilders. The deal would be for the builders to construct affordable homes and be compensated with additional land to build their own homes and sell them in the open market. In fact, analyst Stephen Williams at Brewin Dolphin reckons that public/private partnerships could produce a return on capital of more than 15 per cent, much in line with the returns enjoyed by the private housebuilders.
Estimates vary, but up to 300,000 new homes need to be built every year to meet existing demand and to accommodate the 3m adults aged between 20 and 34 who are still living with their parents. Small private developers were hammered by the recession, and raising finance for the survivors is still difficult. So that leaves the big publicly quoted housebuilders, who built around 62,000 houses last year out of a total of 115,000. The ever-widening gap between supply and demand has been exacerbated by the fact that since 1993 there has been virtually no housing construction by local authorities, which in 1955 built 300,000 homes.
These proposals, welcome though they are, throw up some significant uncertainties. The first and most important question is: where is all this land coming from? Well, according to a government report released in June, there are sufficient unused brownfield sites available right now to provide 200,000 homes in the next six years. Crucially, 20 housing zones have been identified in London, which is all the more important when considering that there are 1.7m fewer people living in inner London boroughs now than there were a hundred years ago.
The second question is price. Without doubt, the new houses will be rented out, perhaps with an option to buy at some stage. Next comes the question of who is going to pay for all this development. Government subsidies will go some way to meeting the cost, while local authorities can now use rental income to support new construction. Every deal will be different, but it seems certain that institutional money will be attracted as well.
The joint-venture approach is already starting to happen. Kier (KIE), for example, is in collaboration with Network Rail to maximise the potential of spare land. This is currently under way at Twickenham station. Network Rail gets a nice new station built for it, and Kier is using the spare land to build 177 new homes including 53 affordable units. Galliford Try (GFRD) has also stepped up its operations as an affordable housing contractor. Turnover more than doubled in the first half of this year and is expected to expand at a similar rate over the next couple of years.
The Right to Buy scheme introduced in the 1980s and a raft of regulations (not to mention a shortage of funds) meant that council house construction steadily declined to extinction thereafter. Now though, it seems we might have come a full circle. All that's needed is to join up the ends.
