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Building the homes we need A PROGRAMME FOR THE 2015 GOVERNMENT kpmg.co.uk ACKNOWLEDGEMENTS This report is the result of a year-long joint project by KPMG in the UK and Shelter to contribute to the crucial national debate on the housing shortage. In October 2013 we published an interim report which summarised our findings from a series of roundtables in the West Midlands, and several other subsequent roundtable discussions. We have now supplemented our findings from the West Midlands with expert input from the UK and abroad, and with a series of commissioned technical research reports led by Capital Economics, Europe Economics and IPPR, to develop a comprehensive package of solutions to the housing shortage. Report authors: Pete Jefferys, Toby Lloyd, Andy Argyle, Joe Sarling, Jan Crosby, John Bibby. KPMG and Shelter project teams: Steve Akehurst, Thomas McCarthy, Sorrelle Cooper, Marianne Fallon, Roger Harding, Liz Hickson, Arthur Hook, Ian Joynson, Markus Korner, Andrew Nolan, Campbell Robb, Lizzie Russell, Zoe Sheppard, Isabel Thompson and Clare Woodham. We would also like to thank everybody who organised and participated in open and candid discussions at roundtables and other meetings, and all those who commented on draft versions of the report. © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Contents Foreword: An open letter to the Party Leaders 2 Executive summary 5 Part I: The housing shortage and its impacts 18 - Current impacts of the housing shortage 22 - What will happen if we take no further action? 28 Part II: England’s broken supply system 32 -The land supply system 32 -The house building sector 42 - Public investment 45 - Building local consensus 48 Part III: The solutions 50 - Land market reform 51 - A more diverse and resilient developer market 64 - Investment in affordable homes 72 - Strategic local leadership 82 Part IV: A programme for government 90 -The new housing principles our country needs 92 -The programme to kick start a long-term change 94 Conclusion 102 Appendix 1: Summary of evidence 104 Appendix 2: Assumptions for KPMG/Shelter housing programme illustrations 106 Building the homes we need | A programme for the 2015 government | 1 © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Foreword Executive summary Part I: The housing shortage and its impacts Part II: England’s broken supply system Part III: The solutions Part IV: A programme for government Conclusion Appendices Recommendations in this report Area for reform Policy recommendations Vision Land Market 1. Introduce “new homes Zones” Our vision is for a land supply system that 2. Incentivise the use of stalled sites is transparent, efficient and stable and 3. Build new Garden Cities most importantly provides much more land at lower prices 4. Open up the land market with far more data House 5. help local builders access finance Our vision is for a house building sector building 6. Prioritise stable house prices to help with many more local builders and more market SME builders innovative models of development such 7. Provide land for custom build as custom build. We need the big players running at full throttle, but alone they won’t 8. Level the playing field for builders with be able to solve the housing shortage. We national space standards need to help local builders thrive once more and new builders join the market. Affordable 9. Boost public and private investment in Our vision is for an affordable housing housing affordable homes sector that’s well funded, has a variety investment 10. Set up a National Housing Investment of developers and produces high quality Bank and use public land in joint homes for a wide range of income groups, ventures including social rented homes for those on low incomes and shared ownership 11. Raise borrowing caps on local authority homes for middle earners. building Strategic local 12. Put housing at the heart of new City Our vision is for cities and towns which leadership Deals plan strategically: linking jobs, services, 13. A ssess housing needs across local transport and homes. Local leadership will authority boundaries be vital to get us building the new places 14. Integrate major new infrastructure with we need. new homes 15. Increase flexibility to make green belt swaps 2 | Building the homes we need | A programme for the 2015 government © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Foreword Executive summary Part I: The housing shortage and its impacts Part II: England’s broken supply system Part III: The solutions Part IV: A programme for government Conclusion Appendices Dear David Cameron, Nick Clegg and Ed Miliband, Everyone now accepts that we have a desperate housing shortage in England. Each year we build 100,000 fewer homes than we need, adding to a shortage that has been growing for decades.What’s more our current house building system seems incapable of delivering growth on the scale required. Growing demand means that without a step change in supply we will be locked into a spiral of increasing house prices and rents – making the current housing crisis worse. Despite modest efforts to improve supply over many years, there has been no comprehensive plan to get us rapidly building the homes the country needs. If the next government shies away from showing the strong leadership needed, having a home of your own to rent or buy affordably will become a distant dream for an increasing number of people in this country. Rents will rise and homelessness will increase. The economic recovery will be held back by high housing costs, an immobile workforce and unstable housing markets. In short, the country needs a serious plan to transform housing supply. One that faces up to tough choices, but also sets a new tone for political generations to come – and all parties need to sign up to it. Solving this problem will take leadership and vision from across the political spectrum at local and national level. All Parties share responsibility for the housing shortage, and all must commit to ending it. KPMG and Shelter have put together a comprehensive, visionary programme for the next government to get the country building the homes it needs. Taking steps to lower the cost of land for development will reduce the profits made by some land owners, but allow better homes to be built and stimulate a new wave of SME builders who have been squeezed out of the market. Increasing investment to build genuinely affordable homes will mean tough fiscal choices, but reducing the cost of housing will also cut the welfare bill. Introducing new taxes on unused housing land and empty homes will be unpopular with some, but it will get development moving on stalled sites. There are no easy solutions or silver bullets. Coherent and co-ordinated action is needed at each stage of the development process, to deliver a new vision in the way that housing is provided in England. This report has been written through close collaboration between housing policy, financial and housing market experts in KPMG and Shelter. It draws on a wide range of expertise and new research to address the problems and propose solutions. We are confident that our programme will create the new generation of homes which are so desperately needed. We look for ward to working with you to deliver it. Marianne Fallon Campbell Robb – Uk head of corporate Affairs, – ceo, KPMG in the UK Shelter Building the homes we need | A programme for the 2015 government | 3 © 2014 KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved. Foreword Executive summary Part I: The housing shortage and its impacts Part II: England’s broken supply system Part III: The solutions Part IV: A programme for government Conclusion Appendices Executive Summary The housing shortage and its implications We need to build more homes in England.1 With rents and house prices rising, a great many are struggling and many more are worrying where their children and grandchildren will be able to live. Across England, a quarter of adults under the age of 35 are living in their childhood bedroom.2 If we do not take firm action to build more homes there will be very worrying consequences for our economy and society. The impacts will be felt in rising homelessness, stalled social mobility, declining pension saving and an ever rising benefit bill. High house prices and often unaffordable private rented housing is already impacting the country’s competitiveness, particularly given that migration to the job market in London and the South East is increasing, but it is this market that has the highest housing costs.3 Changing demographics mean we need to build a minimum of 250,000 new homes per year in England to meet rising demand. Last year, we built just 110,000. But the housing shortage is not a new phenomenon: successive governments have failed to get us building at the rate we once did, and no party has yet presented a credible plan to fill that gap.
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