That the UK has a major housing problem is universally agreed. The generally agreed target of 200,000 new homes per year that need building to address the current housing annual housing need remains just that: a target. Private and public sector development totals are falling significantly short, with current annual completions standing in the region of 140,000 new homes.
Building of new homes by local authorities has declined dramatically from its boom in the post-war period when, between 1950 and 1959, nearly 1.5 million new homes were completed. From 2010-2015 just over 8,000 were built by local authorities in the UK. Some of that shortfall has been taken up by housing associations, and of course, a significant amount by the private sector. However, the availability of capacity and competition for resources at these organisations, coupled with a requirement to act commercially and a focus on driving profitability, is fuelling a growing unmet demand for housing across the country –particularly acute in some areas such as London and the South East. In turn, this is placing considerable pressure on local authorities to respond.
Local authorities can no longer simply build new houses on-demand. They face considerable regulatory and financial constraints. In addition, the expertise required to successfully develop new homes at scale is in short supply. What’s needed instead is a new approach to partnership between the public and private sector that can help both meet their goals. But those partnerships are much more complex and nuanced than a simple exchange of finance (private sector) and land (local authority). There are a number of other considerations that need to be taken into account in order to create a truly shared vision between the public and private sector that is essential for both to achieve their goals.
We’ve worked with a number of local authorities to help them develop innovative partnership approaches that have enabled them to engage with private sector developers to create mutually beneficial longer term outcomes. Increasingly, one of the key characteristics of success is the ability to create a real sense of place. And that often means introducing a third partner – the community. Areas that have been run-down and suffered from a wide range of problems are being given a new lease of life through productive partnerships between local authorities, developers and the community. Conversely, large developments that could be disruptive to existing communities also require strategies to address any concerns about disruption that may arise.
Capitalising on the opportunities that each of these partners has to offer the other means developing mutual understanding. Local authorities are increasingly in competition with one another to attract the development expertise, risk management and development ‘nous’ that the private sector can offer. To do that, they need to become ‘investment ready’, with understanding of the commercial appeal that development of a large site may have and the rewards that it can generate for developers. On the other hand, those in the private sector must also acquire a deeper understanding of local authorities’ aims. Given the regulatory constraints within which they operate, many local authorities are looking for ways to use their capital assets (ie land) to create longer term revenue streams that can compensate for the cuts they face in other areas. That may mean creating structures that provide an income, rather than a one-off capital payment and putting forward the compelling narratives that will enable local authorities to achieve their goals for more housing.
In the post-Brexit landscape, many things are uncertain. But one thing’s for sure: the UK needs to build more homes. The only way that can happen at scale is for the public and private sector to form strategic partnerships that build upon their mutual strengths to create an outcome greater than the sum of its parts. The conversations about how to achieve it need to start now.