I need hardly say that the state of the housing market has become the number one issue for the industry and for HBF. The risks to the industry, Government targets and the wider economy, are very clear. I have often been asked in recent weeks whether the Government is aware of the true situation. I can reassure you – if ‘reassure’ is the right word at this time – that we have done everything possible to make sure the people who matter in Government are fully aware of the state of the market in general, and of the new homes sector in particular. I have outlined in full below our recent meetings with the Bank of England, Treasury and others and HBF will continue to the make the case to Government, Westminster, the media and the public at large that urgent action is needed if confidence in the industry is to be maintained and our new home commitments delivered. KEY ISSUES Housing market The £50 billion Special Liquidity Scheme announced by the Bank of England on 21 April is the most visible proof that the Government and the Bank understand the seriousness of the credit crisis. The acid test of course will be whether the Bank’s efforts lead to a fall in LIBOR, cuts in mortgage rates, an increase in mortgage funding and the restoration of more normal lending terms, such as loan-to-value ratios. HBF has for many years supplied regular data on trends in the new home sector to officials at the Treasury, the Bank of England and CLG. This information has been particularly valuable recently, providing officials with a unique, up-to-date barometer of trends. Before Christmas, I arranged for the CEOs of some of the largest companies to meet members of the Monetary Policy Committee and Bank of England officials, as well as key Treasury officials. Subsequent meetings have ensued. Our most recent visit to Threadneedle Street was only two weeks ago, and on 18 April I again took a group of senior industry representatives to meet Treasury officials. I am also assured by officials that the Prime Minister and Chancellor have been fully briefed on the current market. In our Budget Submission in February, we proposed a number of measures to help restore confidence to the housing market and sustain new home building. Our suggestion of relaxing Housing Corporation space and sustainability standards to enable housing associations to buy additional dwellings from home builders was taken up. Our other suggestions, most notably on stamp duty, were not. We are however continuing with our efforts to press the Government into taking action beyond the £50 billion Special Liquidity Scheme, arguing that more needs to be done to help restore consumer confidence. We have discussed with officials a number of areas which we believe might assist and have now formally submitted these to the Government (a copy of our Housing Market Package is available to members on our website please click here to view). Over the coming weeks, my absolute priority will be to do everything possible to put the industry’s case to Government, make the Government and the Bank fully aware of market conditions, and to put forward potential solutions and ideas to help avert an even more serious crisis . Cumulative Burden of Regulation Market conditions aside, the impact of regulation on home builders’ costs remains a major longer-term concern. I mentioned in the previous Update my letter to the Prime Minister on this subject. I stressed the industry’s desire to work closely with Government to resolve the conflict between its housing targets and its many other aspirations, such as sustainability, Affordable Housing, funding infrastructure out of land values, Lifetime Homes, etc. I have subsequently had a reply from the Housing Minister, Caroline Flint, in response to the PM’s letter. She recognises that this is a very serious issue and is anxious to work with us to find a resolution. HBF has begun discussions with CLG officials to discuss the cost impact of regulation and what might be done to restore viability and help the industry boost housing output once the market recovers. Also, we have arranged for a number of major home builders to make site presentations to the Housing Minister and officials, demonstrating how regulatory costs will have a dramatic impact on viability, land supply and housing output in the light of the CIL and zero-carbon. Real-life examples are the most powerful evidence we can provide and I am very grateful to the companies who have volunteered to make these presentations. In addition a meeting has been arranged with Baroness Andrews to discuss the Government’s recently announced Lifetime Homes initiative. Caroline Flint’s First Speech to Members In her first speech to members at the HBF Annual Lunch on 23 April, the new Housing Minister Caroline Flint responded to my speech calling for more to be done for first-time buyers and concerns over the growing cost of regulation. She recognised the difficult conditions the industry currently faces and the related problem of first-time buyers being increasingly shut out of the market. She re-iterated her hope that lenders would pass on the benefits of the liquidity package from the Bank of England to borrowers, said the Government was looking at what more might be done to help first timers and confirmed Government support for action by the Housing Corporation and English Partnerships to help underpin output where possible with a view to safeguarding future capacity. Commenting on concerns about the growing burden of regulation, the Minister made it clear that whilst the policy objectives involved were important for the Government, they needed to be achieved in ways that were sustainable in business terms. Customer Satisfaction I am delighted to report that a large majority of Britain’s new home buyers are satisfied with their purchase, according to the HBF’s third annual Customer Satisfaction Survey. Just over three quarters (76%) of purchasers in the 12 months from October 2006 to September 2007 were satisfied with the overall quality of their home, and three quarters would recommend their builder to a friend. These results are broadly in line with the two previous surveys, although after-sales service and the recommendation rate have fallen back slightly. Reducing defects and improving after-sales service remain key areas for industry improvement. ECONOMIC AFFAIRS Callcutt Review I have been told by the Housing Minister that CLG’s response to the Callcutt Review will appear “in the near future”. As part of our response to the Callcutt Review, we wrote to the Minister about the Review’s recommendation that HBF’s Customer Satisfaction Survey should be funded by Government and run by an independent body. We are hopeful that our alternative proposal, that the survey should migrate to the new body likely to run the industry OFT Code, will find favour. Amendment to HBF Code of Conduct Following extensive consultation with many members, and discussions with the Council of Mortgage Lenders, on 16 April we announced an amendment to our voluntary Code of Conduct. This amended Code will provide guidance to home builders to ensure transparency of new property pricing, taking account of any incentives or discounts being offered, and will provide assurance to homebuyers and lenders alike that discounts and incentives are totally transparent. OFT Code of Conduct Our discussions continue with the OFT, our partners NHBC and other trade bodies and warranty providers, with a view to setting up an OFT-compliant Code of Conduct. We are making good progress and our draft ideas appear to have OFT support, subject to some fine tuning. OFT We are continuing to have regular dialogue with the OFT about their Market Study, the findings of which are now likely to be announced in the Autumn rather than late Summer as originally intended. EXTERNAL AFFAIRS Political Contacts We are arranging meetings with MPs to raise awareness of HBF’s position, and to explore possible areas of cooperation. MPs with plans or prospects for significant growth in their constituencies, including the new Growth Points, are of particular interest. We will report on any specific initiatives that result at forthcoming MDs’ dinners. Environmental Audit Committee The House of Commons Environmental Audit Select Committee is holding a further housing inquiry entitled “Greener homes for the future? An environmental analysis of the Government’s house-building plans.” We are expecting to be invited to give oral evidence to the Committee during May. Questions to us are likely to focus on issues connected with the zero-carbon homes objective, the Code for Sustainable Homes, eco-towns and planning issues connected with environmental protection. Renewable energy Following a successful seminar for members on renewable energy technologies held jointly with the Renewable Energy Association (REA), we are continuing to develop contacts and relationships with bodies interested in the provision of renewable energy. As part of this dialogue, we have also issued a joint press statement with the REA supporting an amendment to the current Energy Bill providing for a renewable energy tariff for exporting energy to the grid as an incentive to attract more investment in commercially viable renewable supply. UEPC HBF attended the 50th anniversary meetings of our European trade association, the UEPC, at the end of April. Amongst other activity, the UEPC adopted its own Sustainability Charter – which we have played a major part in drafting – that will enable the industry to present its position effectively on such issues at the European level. HBF has also redrafted a UEPC position paper on VAT designed to persuade the European Commission to adopt policy proposals to ensure Member States can have long-term certainty in maintaining reduced or zero rates of VAT on housing. Early indications are that the Commission is minded to meet UEPC’s wishes. PLANNING AFFAIRS Killian/Pretty Review into the Planning Application Process On 25 March, the Government announced an end-to-end review of the planning application process to be carried out by Joanna Killian, CEO of Essex County Council and HBF Board Director and New Homes Marketing Board Chairman David Pretty. It will report by the end of the year and is currently gathering evidence of issues and problems through stakeholder events and representations. HBF is represented on the Review’s Steering Group, and members are encouraged to get involved as much as possible, either through the usual HBF channels or directly with the Review team. The Review team can be contacted at: reviewofplanningapplicationprocess@communities.gsi.gov.uk Eco-towns The publication of the CLG consultation paper “Eco-towns – living a greener future” has received a very mixed response. The 15 location specific proposals will see “up to 10” selected as suitable for development later this year. Somewhat inevitably, the document has seen local residents groups criticise the “top down” heavy handed planning by central Government riding roughshod over local people’s concerns and wishes. There is considerable confusion as to the place of eco-towns in the development plan-led system, with CLG adamant all of the successful schemes will be a part of the regional and local strategy documents. However, CLG intends to publish a Planning Policy Statement on eco-towns which “will be an important material consideration in the determination of any planning application for an eco-town.” Just as confusing is the contribution that any new eco-town will make towards the Government’s housing targets, and, more importantly the targets already set out in emerging RSS. The consultation document guidance clearly shows eco-towns will contribute to the 240,000 dwellings per annum, and a passing reference is made to the fact that the Government will expect increased RSS figures to reflect the programme. This implies that eco-towns are, indeed, considered to be additional to those targets set out in currently emerging RSS. Overall, it is sad that the Government appears to have managed the eco-towns process quite badly. It has drawn negative press and, in many places, vociferous local opposition, missing the opportunity to sell eco-towns as another step in the provision of vital new homes. Planning Bill The date of the Third reading of the Planning Bill has still not been announced. Officials tell us there is such a logjam in the Parliamentary process that the Bill is unlikely to receive Royal Assent (when it becomes an Act) until November. This is caused, in part, by the Housing and Regeneration Bill (setting out details of the formation of the Homes and Communities Agency) and the Planning Bill being taken through the House of Lords by the same peer, Baroness Andrews. Having previously stated that the Regulations required for much of the Bill (not least the Community Infrastructure Levy) would not be produced concurrently with the Bill’s progress, officials will now use this delay to draft some of the regulations to make up lost time. However, delay in implementation of the Bill’s contents seems inevitable and we will continue to pass on new timetables as soon as we have them. Community Infrastructure Levy (CIL) Involvement and consultation with our membership and CLG continues in the form set out in previous reports. While discussions continue to appear to throw up more questions than answers, I remain convinced all of the key players have very little between them regarding the principles of CIL. However, it does not mean delivery of the goal is made any clearer or easier. The delay to the progress of the Planning Bill is a double-edged sword. While allowing more discussions and wrangling on the issues, it distracts minds from reaching agreement. The next key stage will be passage through the House of Lords and the emergence of the draft regulations setting out the detail of implementation. This will probably not now occur until June/July, and may even be held over until the extended Parliamentary session after the summer recess. I remain grateful to those HBF members who continue to give their time and effort towards these ongoing discussions, and those taking part in the debates around the country at HBF meetings and dinners. TECHNICAL AFFAIRS Lifetime Homes As you know the Government has recently committed itself to supporting the uptake of the Lifetime Homes Standard stating that if there is not “sufficient” voluntary uptake by home builders by 2010, CLG will consult on including the Standards in the Building Regulations from 2013. They have also stated that all publicly funded housing will be built to the Standards by 2011. As I reported last month I was extremely concerned both by the contents of the announcement and the lack of consultation between CLG and ourselves. As a result of a strongly worded letter to Caroline Flint I shall be meeting with Baroness Andrews, the Minister responsible, to express our discomfort at yet another regulatory burden being placed on our industry. The increased footprint and associated build costs seriously affects the cost of properties, particularly smaller ones. While the Government suggests that costs are in the region of £500, the Scottish experience suggests that they are closer to £2000 per plot. The Building Regulations Advisory Committee (BRAC) has been asked to form a working party to look at the issue. It is expected that two representatives from the home building industry will be invited to join this working party. The Future of Building Control consultation Following an informal consultation last year, the Government has now published ‘The Future of Building Control.’ It proposes a more efficient risk-based inspection process for Local Authorities and a more systematic approach to the review of Building Regulations. The main ideas of the consultation are: • Removal of Statutory notification stages for LABC • More systematic review of the Building Regulations • More restricted use of Building Notices • 2 year extension in the time limit for enforcement action under Building Regulations • Fixed penalty or stop notices to be issued by Local Authorities • New guidance on extensions and conversions for home owners • Relationship between planning and building control to be improved by “more e-enabled internet services”. HBF has set up a working group to prepare an industry response but members are also urged to send in their own. S38 Agreements and commuted sums The Department for Transport set up a group last year to recommend standard fees for all highway works (including Section 38 commuted sums), with HBF invited to take part. We cited our legal advice and documentation, making it clear that there was no provision for any authority to charge commuted sums for the future maintenance of highways adopted under Section 38. However it become apparent over several meetings that the group are ignoring our legal advice and proceeding to develop recommended standard fees for highway works including charges for future maintenance of adopted roads. HBF has consequently withdrawn from this group, and a letter was sent to DfT stating our objections. We could not support the charging of fees we believed were unlawful, and we would not be associated with any proposals from this group until the legal position had been properly considered. Regrettably a draft document has now been issued containing HBF’s name. We have again written to DfT reiterating our position and asking for a clarifying statement to be sent out to ensure all parties are made aware that HBF does not support their proposals. Meanwhile as it is clear that this is increasingly likely to become a serious concern for members HBF will be taking legal advice to clarify whether the previous advice we received in respect of a specific case in Lancashire still holds. Building Regulations Part G (Hygiene) - proposed consultation We understand that this will be issued in May, with the consultation period running for 12 weeks. It is expected that the findings from the Water Efficiency in New Buildings consultation, which ran in the early part of 2007, will be included along with measures to prevent scalding from hot taps. The revised part G is renamed ‘Sanitation, Hot Water Safety and Water Efficiency’. Our main concern at this stage is how this proposed revision will fit in with the Code for Sustainable Homes. HBF is setting up a working group to scrutinise and respond to the consultation once it is released. Any member wishing to be part of this working group should contact Dave Mitchell on dave.mitchell@hbf.co.uk AND FINALLY… I hope that you have found this update interesting. As stated at the beginning the current market difficulties we are facing as a consequence of the credit crunch and tightening mortgage market are clearly our major priority. It is important however that we also stay fully focussed on the major policy areas as well which I hope this report demonstrates we are doing. With the double whammy of market conditions and the ever growing burden of regulation it has never been more important that our industry is properly represented making sure our concerns and ideas and understood. As always please do not hesitate to contact me or any of the team here at HBF if you would like to discuss any of the issues raised in this report or indeed any other subject.
