Friday, 14 September 2012

Housing and planning - a week later, but has the dust settled?

You might well have noticed that, although I'm based in a planning school, I don't talk about the planning system very much on this blog. That is basically because my research interests are not really about the planning system as it has been set up in the UK - the system of development plans and development management to ensure new development is in line with those development plans. Thanks to my doctoral research, I approach planning from a more abstracted level - that planning covers, and is informed by, wider research about policy administration and analysis and urban sociology and geography. My planning is about any policy that has an interaction with place. This is not that I don't find planning very interesting (I do, as it brings a lot of the issues I'm interested in into stark relief) but it's not my central research focus.

A colleague from the University of Sheffield, Dr Sarah Payne, researches volume housebuilders and the planning system. Understandably, she was getting very exercised on Twitter about the UK Government's repeated claims over the past fortnight of planning as a barrier to growth. So, I invited her to write her first academic blog entry on the topic. So, over to Sarah, and some proper planning:

In England last week, we saw the announcement of a number of planning and housing reforms which the UK Government said would boost the economy, slash unnecessary red tape across the planning system and provide support for businesses, first time buyers and developers. The main premise underpinning these reforms is that the planning system is slowing down housebuilding and holding us back from much needed economic growth. David Cameron says he is serious about rolling up his sleeves and doing all he can (insert using the construction industry here) to kick-start the economy.

However, it is not the premise upon which these reforms are based that is my focus. To me that’s just politics (but then again I am rather cynical). It’s the implications of these reforms, the potential outcomes and the ideological message they convey that I’m interested in. That’s because since the Coalition came to power, they have in my view failed to properly understand the nature of the beast – that the structure of housing provision is broken - and in particular, the dynamic processes through which homes are (not) being delivered. To really understand the problems we face would be to view the planning system as just one piece of the jigsaw. So the Coalition’s focus on the planning system as a means of explaining the mess we’re in is troubling me beyond words. Not only does it discredit a system that is necessary and has worked well (look outside the window, planning most likely helped deliver the good things you see) but it takes the focus of attention away from a myriad of other pressing issues that require policy intervention. More serious than this though, it places the responsibility and accountability of the problem in the hands of planners and developers. Yes, planners and developers are part of that jigsaw and are the engines of growth, but they are not the complete picture, they are not in the driving seat. We still need someone to steer and direct that growth.

Whilst it was hard not to write this blog last week, fresh from reading No10’s announcement and viewing the various opinions, comments and rants from my Twitter followers, I wanted to take a step back and reflect on what this meant for housebuilding in England and in particular, what further questions these reforms raised over the existing structure of housing provision. I didn’t want to let my utter dismay at the Coalition failing again to understand the structural problems of speculative housebuilding delivery get in the way. But alas, I wake up yesterday morning to the Daily Telegraph and the Policy Exchange pitting developers against greenbelt-located rural dwellers in a way that reads more like a cock and bull story than a solution to our housing crisis. So, I want to focus my efforts on housebuilders – the planning systems biggest and most litigious customer. They are here to stay. So we need to find ways of working with them. That is my premise.

Housebuilders have long had to fight their reputation as bulldozing, money grabbing, environment-hating, greedy, bullying developers.  Yes, they do make money from developing land. But, that’s the nature of speculative business activity in a neo-liberal era and it’s a fundamental part of any system relying on the private sector to deliver the majority of new homes. That said, there is scope to better capture the price inflation that occurs during the development process, but more of that later. For now, we need to accept that last week’s reforms intended to stimulate growth are not going to deliver the necessary volume of housebuilding required because they do not address the underlying problems. Indeed, introducing policies that will deliver 75,000 new market homes, ‘up to’ 15,000 new affordable homes, 5,000 homes for rent and 5,000 empty homes back to use is not a reform. Add those totals together and that’s what we need to build each and every year. At least. To deliver such a step change will require asking more fundamental questions such as: can we rely on private housebuilders to deliver the majority of new homes anymore?; is the proven boom bust nature of speculative housebuilding too risky as a means of housing our population any more?; what profits should housebuilders be making during the development process?; should we disconnect land speculation and land trading from the building of houses?; should we increase the tax that landowners pay when they reap the benefits of gaining residential planning permission on their site (it’s not just the housebuilders who benefit)? Without asking these kinds of questions, how can any reforms that the Coalition introduce be more than elastoplast housing policy stuck on to an ever widening fissure?

So, what exactly are these structural problems and how can a better understanding of them help us get out of this housing crisis? Well, first of all, I don’t have the answers. If I did, I’d be on a train down to CLG right now to pester them until they listened to me. But if we consider the way housing and planning policy has been formulated alongside the highly risky nature of the speculative residential development process, it might just help us better understand the underlying issues.

Let’s take a look at the way policy has been formulated and its impact on the planning system. Economists have long been the favoured advisors to Government on all things housebuilding and land supply. And, whilst I am not saying their contributions have not been useful, I am saying that it has focused the minds of policy makers, their advisors and housing ministers on seeing the planning system as a blockage, slowing down the development process, being highly inefficient and impinging on Mr Rational Economic Housebuilder from delivering the amount of new homes needed. It has focused their minds on quantifiable outcomes and not behavioural processes. Using this logic, if the planning system allocated more land for development, then we would see an increase in the number of new homes built. Wrong. This leads me onto my second point – our need to understand the processes by which speculative housebuilders operate and in particular the nature of risk.

Speculative housebuilding is a highly risky and innately volatile enterprise. Financially, housebuilders’ success is dependent on the performance of land, finance and housing markets. Falls in house prices and land prices or rises in interest rates can significantly erode profit margins and land values. In a rising market, the opposite is true. But we are not in a rising market. Success is also dependent on housebuilders gaining planning permission and selling the houses they build at the price necessary to secure a viable return on investment. Let’s take a hypothetical ‘fag packet’ scenario to illustrate this. In an unstable housing market, Developer A agrees to pay Landowner B £860,000 for a site with the potential for 59 houses. That land value is dependent on the houses being sold for an average value of £156,000 and is a net figure minus all the costs associated with development including profit, S106, remediation, build costs, transactions costs and so on. If house prices decrease by 5%, the land value drops to £555,000 as all the other costs remain constant. See a 10% drop and the land value goes down to £250,000. That’s not too bad if you haven’t already handed over the cash to the landowner as you can rejig your deal to account for that depreciation. Now imagine you’ve already done the deal and paid the landowner £860,000 but the market dives and the sales value of the houses you are trying (and I emphasise that) to sell falls by 10%. What happens to that loss of £610,000? It comes off the bottom line. But the developer has not just borrowed £860,000 to pay the landowner for the land, he’s borrowed upwards of £6,500,000 to fund the entire development process and this needs to be paid back to the funder by way of selling the newly built houses to generate that return. And that needs to be done sooner rather than later because the funder is charging interest on that £6,500,000, around £200,000 to be precise over the 2 years it will take to build and sell all the houses. And that calculation is based on a relatively low interest rate of 5.96%. Now, you can imagine the number of possible risks in any speculative residential development scenario in an unstable economic and policy environment – house prices go down, interest rates increase, mortgage access becomes limited reducing your target market, planning policy changes, homes take longer to sell etc. All this risk has to be factored into the development process before a spade hits the ground, before planning permission is granted, before the land has any value, before the deal is done. Add to that the fact that the development process can take yonks – anywhere from 18 months to 10 years. So, understanding how developers negate and manage risk is the key to understanding how and why they operate the way they do. More importantly, it presents the opportunity for policy makers to deliver solutions that work with the grain of the industry. It also helps us better appreciate why housebuilders don’t just roll up their sleeves and build more homes as David Cameron so wishes.  

The big speculative housebuilders are, financially, fairly well placed to get building again. But, they are quite rightly being very cautious about the prevailingly volatile land, finance and housing markets, as businesses would. They are probably questioning, daily, whether house prices will continue to bounce around, go up or go down and wondering how to factor that risk into their appraisals, land offers, purchase agreements and cash flows to negate it as best they can. Before any of that however, housebuilders have got to find land that they know, with a fairly good level of certainty, will get planning permission and given the utter flux of housing and planning policy that is currently governing their business activities, this is an equally uncertain enterprise.

We’ve recently see housebuilders dragged through the press and criticised for hoarding developable land in their land banks and building profits not houses. But, to blame housebuilders without an appropriate understanding of their development process is, quite frankly, misguided. It’s easy and avoids looking at the real structural problems of housing provision in England. That there isn’t enough land being released for development or at the appropriate rate to accommodate the necessary growth. That there isn’t strategic regional planning policy on housebuilding guiding development to the right places. That landowners are being unrealistic in the value they expect for their land. That greater environmental performance, better design and better quality houses are needed from speculative housebuilder, not just more homes. That there is a serious issue of mortgage finance access. That housing delivery is at the mercy of macroeconomic health.

The recent suggestions of alternative models of housebuilding have been an interesting read. We’ve seen discussions on self build, increasing public sector provision, joint ventures and stimulating the private rental sector. But, my argument is this – they are not going to deliver the volume of new homes necessary. So what’s the solution? We need to work with the grain of the speculative housebuilding industry to better understand its wider ‘institutional’ constraints, the nature of its risks and the reasons why houses are not being delivered. In doing so, we need to use effective regulatory measures through housing and planning policy to stimulate growth and build capacity in the industry to accelerate the pace of housebuilding in the right locations. For me, this means a return to regional planning and regional housing targets to provide much needed direction and accountability. It also means greenfield release (I didn’t say greenbelt) to provide more land supply and more certainty. And this doesn’t mean building houses in areas shown in the pictures used regularly by the Daily Telegraph to fuel its ‘hands off our land’ campaign. It means targeted urban extensions alongside integrated transport corridors. Green wedges, as they're known.

It also might mean looking at different ways of financing new home purchase, increasing the tax landowners pay when selling land for residential development and increasing the tax developers pay when purchasing land for residential development. Tax breaks could incentivise better design, greater environmental performance and better quality in housebuilding. Carrots and Sticks.

Being at the mercy of market processes requires effective state intervention that suitably penetrates the development process to achieve the desired outcomes. But we’ve got to understand that process before we can make effective changes. In a neo-liberal era, the extent to which the state should intervene in the market can be a highly contentious debate. But its one that needs to exist. We need brave thinking that doesn’t simply discredit developers as greedy bulldozers, but that understands the processes they operate within and seeks to regulate and stimulate change within that context.

Having worked for a housebuilder during the credit crunch, I know all too well the financial pressures they face. But I’ve also experienced the good side of development. We got residential planning consent on a commercially allocated brownfield site that was highly inefficient and terribly contaminated. The site was so constrained that the only viable re-use was to build houses to generate enough capital to pay for ground remediation and existing business to relocate to more efficient premises within the Borough. It was a difficult process. The Local Planning Authority resisted our proposal and asked for nearly 50 financial appraisals to cost various scenarios and their viability implications. But it was worth it. I believed that what we were doing was the best solution for all – the site, the local residents, the existing business, the landscape, the access, the Borough, the developer, even the resident badgers! And this is what interests me most about housebuilding and planning. It’s not just about building homes, it’s about facilitating change in the right locations steeped with social, economic and environment purpose. It can work. It does work. But, to do this we need a planning system that regulates and facilitates, that is respected and not discredited. We need volume housebuilders to deliver homes. But we need to understand where the risks are in that process in order to help direct development to the right locations.

Friday, 7 September 2012

Community Planning?

Last week on Twitter I got into a bit of a conversation about this story about a school proposal being stopped by unelected clergy. As a former Committee Clerk for the City of Edinburgh Council (look at the names on reports for the Community Services Scrutiny Panel in 2005) I happened to know that under an old quirk of education legislation, any council committee in Scotland dealing with education issues has to have religious representatives on it. If I recall correctly Edinburgh has three – Church of Scotland, Roman Catholic and "other denominations". The people I was chatting with were very (and rightly) aggrieved that these unelected people could make important decisions. My response was they should be more concerned about accountability in Community Planning Partnerships than in these cases.

To which the response was:
The following week I was in another twitter conversation and again I mentioned Community Planning. This time it was confused for land-use planning and I had to try and explain the difference in 140 characters. The exact same thing happened when I rang Renfrewshire Council when I started my PhD fieldwork in 2007 - the local authority switchboard put me through to the planning department when I asked for the Community Planning Section (and this was not the first time this had happened).

A little while ago I popped in a FOI request to Edinburgh Council and got the following request for clarification back:

"A little while ago neighbourhood activities in the Leith and Leith Walk ward areas became the responsibility of the City Centre neighbourhood office which was re-titled ‘City Centre and Leith.’ Responsibility for neighbourhood activities in ... Street are therefore with the City Centre and Leith office."

So, even me who studies Community Planning for my research got the details of my local Communtiy Planning arrangements wrong. Reassuringly, this backs up my finding from my doctoral research that no one has a clue about Community Planning.

The question is – does it really matter? At a local authority level a Community Planning Partnership is quite remote. It's mainly about making sure that strategically the key bodies covering any local authority area are vaguely aligned to the same objective – the Health Board, local transport partnership, Fire and Rescue Service, Police and “community”. The sort of business that goes on at these CPP boards is so dry that I imagine most people in the community wouldn’t want to be involved in anyway. They would be very happy to leave it to their elected members – most CPPs are chaired by the Leader of the Council. However, if we accept that CPPs do have a “leadership” role and are accountable to communities through their constituent partners, then I really don’t think they should be called “Community” Planning Partnerships but just “Strategic Service Planning Partnership” (or even Local Strategic Partnerships as they were in England).

But in the academic literature, the accountability of these partnerships has been a major question (see the work of Helen Sullivan(£) and Chris Skelcher(£) in particular), and just saying that they are strategic and include community representation does not answer these critiques. And what is more, under the proposals of the Christie Commission and the review of Community Planning, CPPs are going to become more important in service design and delivery. The creation of the single national Police service and Fire and Rescue Service will probably also increase their role. I’ve not read it, but I also imagine the proposals for further integration of health and social care also mean that the role of CPPs will increase. 

When I used to work at the Scottish Government and would sometimes ponder these problems of accountability in CPPs a response quite commonly was “it doesn’t matter so long as we’re meeting outcomes”. Now, for those of you who don’t know about this, basically all public services in Scotland have to meet 16 national outcomes, and I wrote about my reservations with it here. My particular concern which relates to this issue of accountability I’m discussing here is this point about “what matters is outcomes” – we can kill all first born children, but if that means we’re a more equal society, then so be it.

Another issue around accountability which came up in my doctoral research and I have just drafted an article about is that these partnerships, which are predominantly made up of the senior managers of constitutive organisations, do present themselves as the “community”. They are therefore the accountable body to themselves because they are in partnership with the “community”. This is the case even though these managers would happily admit that they wouldn’t attend similar partnerships as the “community” in their own towns, because like everyone else they can’t be bothered; and that they openly acknowledged that they spoke “Council speak” that no one else understood.

In sum then, I don’t think the complicated webs of accountability for CPPs are enough. I also don’t think accountability to outcomes is enough at all. This is merely a performance and efficiency measure when there is a lot more to be accountable for. That most people when you discuss “Community Planning” either don’t know what you mean or presume you’re talking about land-use planning should be very concerning as their role in managing and delivering services grows. And this is not just a need to a pointless information campaign to tell people about what’s going on (who would want to know, anyway). For me the lack of engagement in Community Planning belies a problem at the heart of the process – it tries to make very political decisions (with a big P and little p) be managerial, non-ideological and easy. These decisions are political and if CPPs do begin to take on a bigger role they do need to be scrutinised in public a lot more, have formal rules around their function placed in legislation and also openly challenged on the decisions they make. Just because a decision might “meet outcomes” does not make it right.

Monday, 3 September 2012

‘Hard-to-Reach’ or ‘Easy-to-Ignore’?

In previous posts here and here I’ve discussed a rapid evidence review that myself and colleagues carried out on equalities and place-based policies in Scotland. Well the report has now been published. It’s been sent onto the Scottish Government and will also feed into the evidence being Local Government Committee in the Scottish Parliament inquiry into regeneration and economic development. Thanks to the good work of the EHRC it’s also been picked up by the media – the Herald, Scotsman and most amazingly the Scottish Sun!

A lot of what it discusses I’ve already talked about on here. To set the policy context for it, there seems to be a “return to place” in Scottish public with a new national regeneration strategy and other policy moves. Minor moral panics about things like the controversial TV show The Scheme (I’ve not watched it, so I’m leaving my views as “controversial”) have seemingly made neighbourhoods which, for most of the middle-classes in Scotland (including me) might as well be labelled “here be dragons”, seem like cauldrons of antisocial behaviour and poor-parenting that need curing through early-intervention projects. I’ll reiterate what I’ve said before on this blog, these neighbourhoods are like this because we put all our social housing in one place and there is a relationship between income and many of these social problems. We need to stop pathologising neighbourhoods.

Anyway, I’m in danger of digressing into a rant here, so back to what was originally on my mind. One thing that this review explicitly talks too, and I hope challenges, is the “community of place” and “community of interest” dichotomy. As is said quite clearly in the report – people who identify with an equalities group have to live somewhere. I’ve always found the idea that there are these two different communities unhelpful and quite distracting. And I think it makes for very bad community engagement. To reflect on your own experience for a moment, if you’re anything like me you probably identify with many communities and have social capital in these various communities. I want different representation in each one. So, in my work community I want the representation of my union. In relation to my sexual orientation, I want to know that the political bodies and institutions contain people who share my sexual orientation so might be able to raise issues that are pertinent to me. In relation to my place-based community, based on my research, I actually want either organisations that really do represent the diversity of my neighbourhood (and not just those who want to turn up and protect their own interests [£]) This is the sort of anti-majoritarian deep democracy theorised by Iris Marion Young in Inclusion and Democracy. If this is not possible, I want leaders who can stand up for those who are not represented.

It’s because of this that I think the “easy to ignore” point of the title of the review is really important in place-based policies. In Scotland it is easy to presume that the most deprived neighbourhoods are homogenous, working class and White. The picture is actually much more complex. At the most basic level a worryingly large proportion of those residents are Irish Catholic and they are also experiencing poverty. Also, a lot of the problems that are co-incident with poverty – ill health and disability, maternity and paternity (lone parenthood) – are also protected characteristics under the Equality Act 2010. Approaching them from an equalities perspective could, I believe, make place-based regeneration better, or at least improve its presentation (as I’m sure a lot of good work does take place). In sum a more embedded approach to equalities would stop the problematizing of groups and acknowledge the challenges they face – most obviously around disabled people who stop being a figure (of IB claimants or ESA claimants) you want to reduce and become a group who need help to access employment if they want to, or help to maximise their income if this is not possible.

This is an issue I discussed before, but I come back to it again, as I really do feel we need to acknowledge the intersectionality of place and identity when it comes to community and talking about “communities of place and interest” doesn’t help. Anyway, enough of these ramblings. Another thing I mentioned before was my very rapid review of the way the 32 Single Outcome Agreements of CPPs in Scotland treated equalities issues. Well, that’s available here.