Frequently Asked Questions - answers from the CALM Chairman August 2008

As chairman of CALM I have, over the last 2 months, been asked hundreds of questions about the Regional Spatial Strategy, New developments and other questions about housing problems in general. Many of the questions have similar themes so I have struggled to find out answers for you and to produce a FAQ sheet for you.

I should hasten to add that I have no professional expertise, qualifications or training in the field of planning. I am an Engineer and have never worked in housing or local government. The answers I set before you are the result of two months spare time effort reading and listening.

If I had one tip to anyone trying to tread the same route as me eg trying to get answers. My message is FOLLOW THE MONEY.

FAQs

1) Why is there a shortage of houses in the UK?

Ans: There is no overall shortage of houses or accommodation in the UK as a whole. There is however a desperate need for ‘affordable’ housing and accommodation and this problem has become exacerbated by the break up of marriages. (WE are talking here single Mums that are unavailable to work because of family commitments ). Also because the state no longer provides much in the way of care for the elderly,or the long term sick (we are talking here about housing those people and their carers that are unable to work because of their caring commitment). Behind these problems also lies a background of a large and growing proportion of the ordinary working population of low earners that simply cannot afford to buy a house of their own, a problem which is also putting pressure on the private sector rental market. Despite all this doom and despair there is, at any point in time, a surplus of privately owned houses simply standing idle or under-occupied.

2) So why are houses so expensive?

Ans: The answer to this question somewhat surprising. Unusually house prices are directly related to the availability of cash in the economy and have no bearing on the availability of housing stock. This has been the case for over 50 years. Put simply if the ordinary man in the street has any spare cash (or can borrow cash) as a general trend he would prefer to buy another house with it rather than put it into a bank or invest it in say stocks and shares. This is cultural issue not entirely unique to the UK but possibly related to the failure of the Banking and commercial system that over the years has failed to deliver a comparable return to individual savers. In a free market the price of a commodity is normally set by the marginal supplier (the supplier that just satisfies demand). In the UK housing market there is no upper limit for demand other than the constraint of available cash. From this we may deduce that the housing market is not a free market at all but skewed by cultural factors or maybe it is simply the case that we value houses above all other commodities including money and are prepared to spend our entire lives enslaved in work and poverty in order pay off the mortgage on our house. The evidence of the last 50 years is that BUILDING MORE HOUSES WILL HAVE NO AFFECT ON THE PRICE OF HOUSES.

3) What is ‘affordable’ housing?

Ans: ‘Affordable’ is the new euphemism for housing or accommodation that is subsidised by the state or by state sponsored organisations such Housing Associations. Previous euphemisms were ‘social housing’ and ‘council’ houses. I hate the term ‘affordable’ because it would seek to imply that the object was somehow free or partially free from cost. This is certainly not the case and the cost is ultimately born by the whole of the new build market itself and as such is yet just another inflationary pressure that helps to keep all house prices high.

4) If there is no shortage of houses why does the government want to build so many new towns and housing developments?

Ans: The government has no interest in new houses as such only an interest in new ‘affordable’ houses. If you are as old as me you may remember that the conservative government set about selling off council houses so there is now a dire shortage of ‘affordable’ houses. Recent Legislation however helps to ensure that new houses and ‘affordable’ houses are inextricably linked together. The issue of subsidised housing has been a thorn in the side of all governments since the welfare state was first invented . There is a legal obligation placed on local authorities to provide housing and shelter for those people that can’t afford to pay for it themselves. Whilst successive Governments over the last 60 years have basically gone along with the sentiment they have also universally tried to find ways of getting out of paying for it. Our current government is no exception to this rule, preferring instead to spend tax payers money on things like wars in the Middle East. To overcome the shortfall the government has come up with what it believes to be a brilliant new wheeze. In exchange for relaxing planning controls placed on developers, the developers in return supply the ‘affordable’ housing for free. –The advantage to this idea is that hard cash need not necessarily change hands. On any given development, the builders simply build more houses which are then handed over directly to housing associations. The disadvantage is that the real cost of building the ‘affordable’ houses is born by the people buying the other houses in the development and also at the expense of the rest of the population that are denied an adequate infra-structure to support the burgeoning population.

5) What is Section 106?

Ans: Section 106 is the fiscal instrument by which the local authorities claw back money from developers to raise funds for infra-structure and ‘affordable’ housing. In practice most of the money raised from Section 106 gets swallowed up by the ‘affordable ‘ housing which local authorities are legally compelled to give a priority to. As a result very little gets put back into infrastructure. There appears to be no hard and fast rules as to how much Section 106 money can be claimed on any given development. The money is simply bargained for by the planning authority as part of the planning process. The developers either agree to pay it or they don’t get planning permission to go ahead. If the planners ask for too much, the developer may decide to walk away from the deal so the local authorities don’t get any money at all. Local authorities have to be very careful about this because if the houses don’t get built they can (under new laws issued by the government) get fined for failing to meet targets as defined in say the Regional Spatial Strategy.

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6) What do developers think about building affordable housing?

Ans: They hate it. Large developers such as Persimmons generally work on a 20-30% margin on each new house. The margin on ‘affordable houses’ ranges from 0 to 12%. Developers have to raise finance for their building operations to cover them for the huge outlays that they have to make before any single house can be built or sold. To satisfy the share holders and the financiers, the margin is something that cannot simply be negotiated away against Section 106. Normally what happens is that the price that the developer pays to the landowner gets negotiated downwards to accommodate the lack of return on the ‘affordable houses’ that the developer is compelled to build. However the problem of ‘affordable’ housing does not stop there for the developer. To rub salt into the wound the private buyers (the cash providers) on the whole prefer not to live on estates where there is a large proportion of affordable housing. The market value of such properties therefore becomes depressed by the neighbourhood that they are built in and the houses are difficult to sell.

7) Why did the Holton Heath (1500 homes) development fail?

Ans: The anecdote for this is that during a site inspection one day a sand lizard crept out from under a bush. The sand lizard is a protected species and because of this the site was saved. –Personally I have serious doubts about the veracity of this story. Yes it may have been a factor in the eventual decision but I suspect that the real problem was one of critical mass (See 8). It would seem the Holton Heath was on the tipping point for not having quite enough.

8) What is critical mass?

Ans: Medium scale developments (such as the proposed Holton Heath Development have a major impact on local infra-structure. Eg (new Roads schools and hospitals all have to be built to accommodate the new people.) Smaller scale developments can usually be accommodated by pinching. (Eg moving the kids into porta-cabins at school, putting in traffic lights, doubling up of beds in wards at hospitals etc, everything that we have seen going on here for the last 20 years in fact). In a project like Holton Heath however there were simply too many houses to adopt the same approach as you could with a small scale development (especially as we are already at the limits of what can be pinched). Also given the Government policy that ‘The developer pays’ and Holton Heath was not a Large scale development, there was simply was not enough new private houses in the development to pay for the new infra-structure and the new houses and the affordable houses and the finance and the profit margin. In short there was not enough critical mass to make the project viable. (See also FAQ 9 and FAQ 12)

9) Why did the development for Poole Bridge Fail?

Ans: Same Reason As Holton Heath. Not enough projected private money could be raised from the associated Poole Quay (Old Power Station Site) development to pay for the bridge as well. The developers pulled out when they saw the disaster that was unfolding on the other side of the water (Eg the still not fully occupied Poole Pottery site and the Big Ship development.). Interestingly enough the bridge was a Terrence oRourke fiasco, The same team of consultants that are being used in the Lees/ Bloors Homes Project in Lytchett Minster.

10) Why are green field and green belt sites the preferred option for government to build new developments?

Ans: Green field sites generate more money for everyone because of the huge increase in the value of the land after planning consent is granted. Because of this the government is able to take an even larger slice of cash without the same risk of the project becoming non viable as it might with a brown field site.

11) How do new developments effect the natural environment?

Ans: In the past new houses were built by local builders using locally available materials, using skills aquired over a lifetime working at the same trade. Villages and towns evolved over centuries and merged with the landscape which also evolved with it. House building used to be a low carbon technology. Nowadays modern developments are factory built and then assembled by an unskilled work force. Materials are imported in bulk from all over the world. The carbon investment (amount of carbon based fuels burnt) is thousands of times higher than it once was. So to the site, firstly the trees are cut down instead of building around them. Next The top soil is stripped off the entire surface of the development area, removed by huge machines totally destroying all flora and fauna. The area is levelled and re-landscaped, footings dug to a unnecessary depth, drainage put in then the concrete is laid over the top. Only after all this is complete and the new buildings are erected is the now denuded top soil pushed back, replaced and re-planted with artificially grown trees, shrubs and grass (which in themselves have a -ve carbon footprint). It’s called ‘economies of scale’ and its exactly the same process that has got us into such a mess with global warming and all the other environmental disasters we’ve got ourselves into. Its building on the cheap and we all know what happens to cheaply made goods!

Thinking environmentally friendly, thinking Green, thinking Carbon neutral, thinking Community requires a totally new approach just like it does with organic farming. More of the same old, same old will just deliver more of the same thing. Less amenities, More congestion, more unsustainability, more community breakdown.

12) Why do we have to have developments at all? Why can’t we simply have low density housing and build houses as we need them or as the market demands?

Ans: Why not indeed ? Do not be deceived into thinking its just because we live in a tiny island and there are too many people. If you don’t believe me try visiting the island paradise of Bali in Indonesia. Bali has one of the highest population densities in the world (512 people per sq km) and is virtually self sufficient. Houses and villages merge with the landscape. The people are modest, scrupulously honest and believe in balance. It’s the only place I know where the indigenous people genuinely believe that heaven is pretty much like the place where they already live. Our island has less than half the population density of Bali. So ok we perhaps don’t have such a perfect ‘growing climate’ and such a rich volcanic soil, we are however blessed in many other ways where Bali isn’t.