OLIVER'S ARMY                    

NEEDS SOMEWHERE TO STAY

26 June 2018

With his ‘war spirit’ rhetoric in the newspapers over the weekend, it is perhaps not surprising that Oliver Letwin’s draft report on “the cause of the gap between housing completions and the amount of land allocated or permissioned in areas of high housing demand” was published yesterday (25th June 2018). 

While his terms of reference have not changed since the review was first announced by the Chancellor in the 2017 Budget, his own scope has become more stringent: he is now only looking at 15 large sites.

While these sites are intended to deliver 70,000 houses, most will take over 15 years to complete. Assuming that we need to build on average 250,000 houses per year for that 15 years, this means this review has considered a sample of less than 2% of the total supply needed. This seems a little light on which to formulate future housing policy.

Despite this, Letwin’s conclusions are not unreasonable and hopefully will kill off some of the negativity that has been focussed on the housebuilding sector in recent months.

  •  His first conclusion is that it would not be sensible to force major housebuilders to reduce their prices.
  •  His second conclusion is that the country needs more new housing both on smaller sites and larger sites.
  •  Finally, and usefully, he concluded that if more housing of varying types, designs and tenures on large sites could be matched to the desires of the people wanting to live in that particular area, the overall build out rates could be substantially accelerated. While product diversification is nothing new, it is welcome to have someone with the ear of the Government to recognise this and perhaps influence how planning policy, design, and finance can assist this.

 

Letwin also considered other potential constraints on the housing supply, concluding that:

  • The Government needs to do more to deliver the major infrastructure (particularly transport and utilities) necessary to release large sites.
  •  There is a substantial deficit on the number of bricklayers which, with some concerns regarding the future supply of bricks, could be a significant issue in the future.
  •  Finally, and satisfyingly, he has concluded that landbanking is a myth and that housebuilders are simply maintaining a sustainable business model.

He concludes that his final report to the Chancellor ahead of the 2018 Budget will include some policy recommendations, but these will not “throw the baby out with the bathwater”. The trouble is, this review has already been watered down considerably and it now seems likely that its conclusions will not have any teeth - even baby ones.

The fully document and annexes can be found here.

 

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