The economic downturn and how it is being dealt with in the region.
The UK has officially been in recession and this has created major problems for house building. This has had a significant impact for affordable housing provision and the Yorkshire and Humber region has seen an impact on many programmes and sites. This section of the guide considers some case studies that may assist users to find solutions to some of the problems they have been dealing with and provides information to a number of questions that users identified as presenting problems.
The IDeA has produced a brief guide to the recession which is intended to provide some background and contextual information to help councils consider the impact of the recession on their area and formulate their response to it. It looks wider than housing but provides a useful overview.
The guide:
• Summarises the debate about the causes of the recession;
• Draws on recent commentary and analysis of the current position;
• Summarises some work on likely trends over the next two years.
It can be found at: Web link >>
The principal effects of the recession for house builders and housing associations are:
- The reduction in mortgage availability has significantly reduced the proportion of newly registered buyers and newly listed properties. Even as mortgage availability increases, purchasers may be nervous of purchasing in a falling house price market.
- For housing associations there have been difficulties in securing owners for shared ownership houses leaving significant number of empty properties and major financing issues for future schemes. Building for rent would seem a safer option.
- Land purchased/negotiated for new build development before the down turn was usually purchased for prices much higher than it is currently worth and reduced sales values make financial viability increasingly difficult.
- Reduced market values have made schemes more difficult to deliver and even more so if there is an affordable housing provision required.
- A number of schemes have been negotiated with an affordable housing requirement prior to the down turn based on what are now unrealistic assumptions on sales values, which has left many scheme financially unviable and developers looking to renegotiate or stall developments.
- Many schemes on site have been mothballed as developers deal with the increasingly difficult availability of credit and reducing market values.
- There have been an increased number of products launched by government through the Homes and Communities Agency to support purchasers.
- Even if developers can present financially viable schemes, there is a lack of credit being made available by banks to lend to housing associations and developers to fund their development programmes.
- There is a knock-on consequence for housing association budgets, with lower take-up of vacant sale properties as it reduces the borrowing ability of housing associations. This also applies to private developers.
- Whilst many housing associations have considered the opportunity to buy unsold property from the private sectors this has proved difficult. These are often built to lower environmental standards, do not meet housing association requirements and have longer term maintenance costs than Housing Association built schemes.
For local authorities, these effects have created a number of problems and some of these issues are dealt with in this section. However, there is limited guidance available and learning from one another is critical. If you have developed a way through the current difficulties, tell us and we can share your experiences with others. In particular:
- Developers are approaching authorities with potential financially viable schemes but these do not include an affordable housing provision.
- Schemes where an affordable housing provision has been agreed are now unviable and the developer is looking for a reduced provision or change of tenure.
- Developers/ housing associations are seeking to introduce new products such as HomeBuy Direct and Rent to HomeBuy and authorities need to decide whether they will agree and support these product options. Many authorities find these products difficult to understand.
- Authorities are trying to negotiate affordable housing provision in a volatile housing market where sales values are reducing. There is no certainty and negotiations are difficult.
- Authorities are worried that their affordable housing requirement, may now be economically unviable and are unclear how to tackle this?
There are a number of documents that you may find useful:
The credit crunch and regeneration: Impact and implications.
This publication is aimed at regeneration practitioners and policymakers, local authorities, Regional Development Agencies, Housing Market Renewal Pathfinders, New Deal for Communities areas, Urban Regeneration Companies and Economic Development Companies.
There has been much successful regeneration across England during the past decade. But the picture has been changing during the past year as a result of the international credit crunch and economic downturn. This study assesses what the effect has been, what might happen next, and what the key implications are for partners involved in regeneration
Housing Delivery creating a New Normal
A publication by the NHPAU proposes the need to radically trnaform the way we plan for, finance, and develop new housing as the current 'delivery system' is broken
The credit crunch and recession- Commission for Rural Communities
This web site provides relevant reports about rural housing and the down turn. web link >>
Investment and Planning Obligations: Responding to the Downturn
This good practice note aims to inform HCA staff, as well as our stakeholders, of the Agency’s view on how HCA investment can best work with the planning process to assist delivery of affordable housing and help transform communities in the current downturn and into a future recovering market.
Regeneration in a downturn: what needs to change?
This publication builds on the work that the Smith Institute has undertaken in shaping the policy debate on regeneration and renewal. It follows on from the work completed on housing, regional policy and economic development, and complements the recent reports by government and others on regeneration in a recession. Web link >>
Call for good practice
Have you done anything that has assisted with these issues in your authority?
We have provided examples of work elsewhere in the Region that are addressing some of these issues and are looking for further good practice.
The examples of good practice are from:
Harrogate Borough Council
The Council has been unable to confirm the financial viability of any level or mix of affordable housing in the current housing market as current conditions are unlikely still to be in place when the completed units come to the market and it would be unreasonable to fix a level of affordable housing dictated by the current slump in values when, at point of sale, it is reasonable to expect that the market will have recovered.
Wakefield MDC
In Wakefield MDC, the authority was having financial viability issues within the current market. Schemes were being presented by developers without affordable housing provision at all, on the basis that they were not viable, despite having an evidence base through a Strategic Housing Market assessment that affordable housing could be delivered on eligible sites.
City of York Council
In York, developers were offering lower affordable housing provision that required.
Also in York, the pepper potting of a scheme was stalling build.
You may find the following links useful:
Practical approaches to Planning Gain:Renegotiation for smaller schemes for specified circumstances-Slough Web link>>
Practical approaches to Planning Gain:Deferred charges in terms of on site affordable housing provision or commuted sums Web Link >>
Practical approaches to Planning Gain:Examples of procedural guidance Web Link >>
Also refer to the ATLA Guide Web Link >>
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