1. Housing Market Review Andrew Whitaker Planning Director

2. Presentation Outline Supply/demand imbalance Consequences of undersupply Market trends How to increase housing supply Policy tensions

3. Supply/Demand Imbalance

6. 2008-based household projections

7. Housing stock and households, England (2008) (000) Stock Total 22,398 Total stock 22,398 Vacant 783 Vacancies @ 2% 448 Second homes 246 Second homes 246 Total Occupied 21,369 Total Occupied 21,704 Households Independent 21,731 Independent 21,731 ‘Constrained' 511 ‘Constrained' 511 Temporary 11 Temporary 11 Total 22,253 Total 22,253 Adjusted deficit-884 Adjusted deficit-549

8. So how many dwellings do we need? New Households 2008-based projections 2008-31 (England) Principal projection: 232,000 h’hs pa Note: Zero net migration: 149,000 h’hs pa (i.e. migration 36% of principal projection)

9. So how many dwellings do we need? Plus unmet demand (NHPAU estimates 2008) Constrained demand, concealed households, temporary accommodation: 27,450 h’hs pa Plus allowances for 2 nd homes: 2,870 pa Vacancies: 7,280 pa

10. So how many dwellings do we need? TOTAL 270,000 dwellings per year (more if 2008-11 constrained demand/need added)

11. Consequences of Under-supply

12. Under-supply Crisis Consequences/Stress Indicators High house prices against incomes Increased house price volatility House building jobs & contribution to GDP depressed Local labour shortages, including public services Reduced labour mobility Upward wage pressures Unemployment aggravated Regional economic differences reinforced Loss of company competitiveness

13. Under-supply Crisis Consequences/Stress Indicators Uneven distributional impact (age, income) Excessive household debt (especially young) First-time buyers: Historic low numbers 80% dependent on financial assistance Average age unassisted: 31 Average deposit 2010: £31,000 vs income £33,000 Declining household formation 20-39 age group Living at home: 20-34 year olds (2008): 29% males, 18% females Delayed marriage and first child Concealed households (~150,000)

14. Under-supply Crisis Consequences/Stress Indicators Falling owner occupation in England since 2003/rising PRS Rental yields inadequate for institutional investors Escalating ‘affordable housing’ need Homelessness Waiting lists (1.8m households, nearly 5m people) Overcrowding 630,000 (2.9%) households (England) vs 7.9m under- occupying (36.9%) Low vacancy and demolitions (1,100 year replacement rate!) Dwelling and plot sizes squeezed State drunk on “land value capture” – policy & regulation, taxation

15. Market Trends

19. Excess demand

25. New Build Trends

32. Budget Housing Measures FirstBuy: 10,000 FTBs new homes Planning reform – pro growth Non-residential to residential PRS: SDLT bulk purchases and REITs Land auctions Public sector land disposal Burden of regulation and zero carbon

33. How to Increase Supply

34. Restoring Effective Demand Mortgage Market Mortgage supply and high LTVs Refinancing SLS, CGS, RMBS Basle II and III FSA Mortgage Market Reform Competition (6 lenders ~90% approvals) Discriminatory lending new build vs second hand

35. Increasing Investor Demand Private Rented Sector Buy-to-let small landlords Institutional investors Non-institutional scale investors Housing developers RSLs Budget measures (SDLT, REITs)

36. Reviving Supply Permissioned Land Planning reforms, especially NPPF (pro growth) New Homes Bonus Greenfield land Local authority behaviour Local community attitudes

39. Reviving Supply Viable Land: Regulatory Burden Spending Review commitment – reduce ‘total regulatory burden’ on home building by 2015 One in one out rule, etc. Plan for Growth pressure on local authorities Zero carbon new definition Local Standards Framework (flawed concept) – instead local RIAs and plan viability testing

40. Reviving Supply Policy Tensions (contradictions?) Localism vs pro-growth NPPF Localism vs reducing regulatory burden Land value capture vs incentivising developers and land owners (not just communities)

41. Housing Market Review Andrew Whitaker Planning Director