KEY ISSUES Welcome to the first report for 2009. The start of the year has been extremely busy as the daily diet of economic gloom continues to dominate the nightly news and our morning newspapers. That said, I sense from anecdotal feedback from many within our industry a more optimistic mood with some reports of much higher levels of interest from potential purchasers than we experienced in the latter months of 2008 as buyers begin to sense that the market is at or near the bottom and represents a good buying opportunity. We must hope that the unprecedented Government intervention in the credit markets that was announced in January, including the decision to finally act on Sir James Crosby’s recommendations, something HBF has been lobbying hard for in recent months, succeeds. If, and it’s a big if, the Government can work with the lenders to find a way of making the guarantee facility they are putting in place work then maybe the lack of mortgage availability, the biggest obstacle to a turnaround in the housing market, could be removed and the heightened levels of interest turned in to increased reservations. My senior team and I have continued throughout January to meet with a range of political and industry stakeholders on your behalf, including key politicians of all the major parties, senior civil servants, representatives of the lenders and the head of the new Homes and Communities Agency Sir Bob Kerslake. Discussions have been focused on both measures to assist in the current downturn – including the implementation of Government initiatives such as HomeBuy Direct - and on issues that will affect our industry in the recovery. Of particular note was a seminar we held for Government officials on the ‘burden of regulation’. The subsequent reaction shows the impact the session had in terms of making key influencers appreciate the implications for viability of the ever increasing regulatory wish- list. More on all these issues below. ECONOMIC AFFAIRS Government housing measures While it is easy to dismiss the Government’s efforts to help the housing market and support the new homes sector as too little too late, I think we must welcome these measures and look at the cumulative impact they should have. Last year we had £300m provided for housing associations to buy stock from home builders. I understand not all the money has been committed yet, but it is clear from talking to some home builders, and from evidence we have collected from member companies, that stock levels are generally less of a problem than they were some months ago, although they remain far too high. I understand the HomeBuy Direct scheme, launched in response to HBF representations and developed through consultation with the HBF, was finally allocated almost £500m. I estimate it will, if successful, create more than £3bn of new home sales (in excess of 20,000 units) for the industry, a very welcome boost. The Homes and Communities Agency (HCA) is busy sorting out final details of the scheme. HBF had a meeting between HCA officials and HBF members at the end of January to review progress and identify any outstanding difficulties. Problems with OFT credit licence requirements have been resolved and the HCA is working closely with lenders to secure their support for the scheme. There are some early indications that if successful, and if there is demand from home builders, the Government would be sympathetic to extending the scheme. HCA chief executive Sir Bob Kerslake has expressed his willingness to work closely with HBF to identify what other forms of support could be of most benefit and we are thus in regular touch with senior HCA representatives to discuss how it might best be able to use its budget to help maintain activity in the housing market. The HCA is keen to help enable more new developments to proceed in addition to the measures already taken by the Government. We will keep you informed of the progress of this dialogue and involve you wherever possible in the discussions. On 19 January the Government announced a range of measures designed to restore the flow of credit to the economy. In response to recommendations made in Sir James Crosby’s Report on mortgage finance published in November, the Government will offer guarantees to investors in mortgage-backed securities. The scheme will be launched in April, with a lot of detail yet to be finalised, most notably the likely level of lending the Government expects to guarantee. Nor should we forget a range of other measures, such as the mortgage rescue scheme, and the fact that we have the lowest Bank Rate since the Bank of England was founded in 1694; a massive fiscal stimulus to the economy; a dramatic fall in sterling against our main trading partners; and rapidly improving housing affordability. I think there is still some way to go before we see recovery, not least because the economy is not yet past the worst of the recession. However, the unprecedented measures taken by the Government should, at some point, begin to put a floor under house prices and start the slow process of recovery. We will continue to make representations to Government on your behalf and supply valuable information on market trends and on specific industry issues. Burden of Regulation HBF arranged an enormously successful seminar for Government officials on 7 January, entitled the Cumulative Burden of Policy and Regulation. It was attended by officials from the Department of Communities and Local Government (CLG), Treasury, Prime Ministers Delivery Unit, Better Regulation Executive, Department for Environment, Food and Rural Affairs (Defra) and the Bank of England. HBF members Crest Nicholson, McCarthy and Stone, Miller, Persimmon and Taylor Wimpey presented appraisals from a range of sites to demonstrate the impact on land values of policy demands such as Affordable Housing, the Code for Sustainable Homes and Zero-carbon, Lifetime Homes, Community Infrastructure Levy (CIL) and public open space. The effect of the credit crunch on sales values was also highlighted in these appraisals. In addition, CLG and DTZ gave presentations. The seminar was arranged following a series of meetings HBF has held with Government to highlight concerns over attempts by central Government and local authorities to fund an increasing range of policies out of rising residential land values. These demands had already begun to have a very significant impact on land values by mid 2007. Whilst the current economic climate has seen land values fall, policy and regulatory demands remain on an escalating upward trend. HBF argues that unless alternative sources of funding are found for these policy demands, the cost burden of regulation will severely restrict housing output, even in the recovery. The seminar presented an opportunity to make these points to some key influencers and it is unprecedented for the industry to share so much detailed information. I am extremely grateful to the HBF members who gave so much of their time and expertise to make the seminar such a valuable exercise. As a result of the seminar, HBF staff have subsequently had meetings with officials from CLG, Treasury and the Better Regulation Executive, and the HBF member working group is meeting shortly to decide how to take forward this extremely important initiative. One question is how to package the very detailed seminar presentation into a more digestible form that could be distributed more widely. We are also looking at how HBF, working with CLG and the HCA, can get the message across to local planning authorities that they need to be flexible when approached by home builders seeking to renegotiate existing S106 agreements or negotiate agreements on new sites. New home valuation I am also very grateful to the member companies who submitted comments on the draft RICS information paper on new home valuation, despite a tight deadline. (RICS asked us to keep circulation of the paper very limited.) By far the greatest concern was how individual lenders’ instructions to valuers on valuing new homes override the professional Market Value estimates of valuers. We understand the RICS is trying to assimilate an unexpectedly large number of comments on the paper before it is issued, probably in March. HBF also attended a meeting of the CML Valuation Panel to discuss new home valuation with a number of lenders. This covered the issue of lenders’ valuation instructions, as well as the CML Disclosure of Incentives Form. The Form appears to be working well and is achieving its objectives. However, I am disturbed to hear there are still cases in which house builders are not making full disclosure of incentives. I also understand there are schemes being promoted which are designed deliberately to get around these disclosure requirements, and some ‘introducers’ are trying to avoid these requirements. Such activity will only serve to undermine lender confidence in new home values, damaging the interests of all house builders. The CML is considering further amending the Disclosure Form in the light of these cases. OFT Code of Conduct Although the industry technically did not meet the OFT’s milestone on 31 December – that it should have created a body to administer a Code - the OFT has accepted the Heads of Agreement signed by the three warranty bodies (NHBC, Zurich and Premier) as evidence that the process of establishing a Code body has started. A shadow board and an advisory board have been formed, with HBF represented on both. However, the industry must now have a fully constituted body formed by 31 March 2009. In its statement on the 31 December milestone, the OFT said that, given what had been achieved: “the Industry's continued assurances and stated progress towards other milestones, and the fact that it currently appears that the creation of an operational voluntary Code by March 2010 still remains a realistic prospect, the OFT is content to consider the first milestone achieved. Although, we trust that the subsequent milestones will be met in a more definitive way.” EXTERNAL AFFAIRS Relations with the Conservatives We are maintaining our focus on developing a strong and constructive relationship with key members of the Conservative front bench team. We have held further meetings with shadow housing minister Grant Shapps to discuss the current business climate and mortgage lending issues and are delighted that he has agreed to speak at our Spring Policy Conference on 17 March (more details on that below). The Conservatives have rejigged other members of their CLG team with Caroline Spelman replacing Eric Pickles as shadow secretary of state in the reshuffle that followed Ken Clarke’s appointment as shadow business secretary. I am seeking an early meeting with Mrs Spelman to continue the discussions we started with Mr Pickles. We are also developing our relationship with shadow chief secretary to the Treasury, Philip Hammond, and the shadow Treasury team. Meetings with MPs It is also important to build relations with a wide range of MPs with an interest in housing issues at this difficult time. We are therefore continuing our programme of informal bilateral meetings and briefings with backbenchers. This is proving an effective way of spreading understanding of the current issues facing the industry and widening support for action to help it. South West Housing Initiative – meeting with the Minister for the South West We have maintained our active support and involvement in the South West Housing Initiative – a coalition of housing and business bodies seeking a better housing supply for the South West. The SWHI has most recently approached the minister for the South West, Ben Bradshaw MP, for his help in assisting house builders and housing providers in the current climate. We took part in a successful meeting with the minister in early January which led to his agreement to consider what could be done at regional level. Further meetings with the minister are planned and the SWHI has been asked to continue to feed into the Government’s work to tackle the downturn in the region. Definition of zero carbon We are seeking your views at the current round of member meetings and dinners on this important consultation, launched immediately before Christmas. In addition, we are organising a dedicated meeting for members on 19 February in Birmingham to assist us in pulling together the HBF response. Our aim is to circulate in good time the main lines of our proposed response so that you can draw on this in your own submissions to the Government. I would encourage all of you who can to respond since this is clearly one of the issues that will have the greatest potential effect on the business climate for the industry in coming years. Skills It is worth noting that despite the current economic and industry downturn the Government remains very interested in skills issues. This interest has two dimensions for us. Firstly, ministers share our concerns about the impact of the downturn on capacity. We have been asked to keep CLG officials informed of the position and I would be grateful for your feedback in this regard as the year unfolds. Secondly, ministers have ambitious plans to increase the number of apprentices across the economy, including in construction. Whilst fully recognising the constraints of what can be currently done, it is clear that they want to develop ideas for encouraging apprenticeships when times are better. We will keep you informed of developments. PLANNING AFFAIRS Planning Act 2008 Although the Planning Act 2008 was granted Royal Assent in November 2008 most of its provisions are not currently active, requiring specific commencement orders to be passed by the House of Commons before their provisions come into force. The most obvious examples the setting up of the Infrastructure Planning Commission and the Community Infrastructure Levy, both of which will require significant Regulations to be drafted before commencement. However, other, more minor amendments to the planning process are also subject to this delay. Of these, that perhaps of greatest interest to house builders is the proposal to allow minor amendments to be made to planning permissions (S190 of the Act). This Section has not yet been commenced and thus cannot be acted upon by local authorities. We have asked CLG officials for a proposed schedule of commencement for all sections of the Act and will, of course, notify you when such commencements occur. Changes to appeals processes One of the other new provisions of the 2008 Act not yet commenced is the introduction of charges for appeals (Section 200). This Section will be the subject of a forthcoming consultation regarding the scale of fees. However, in preparation for these changes to the appeals system CLG have issued a consultation on a revised circular regarding costs awards in appeals. The main issue dealt with by the consultation is the proposal to extend the costs regime to appeals pursued under the written representations procedure. However, of greatest concern is the suggestion that the act of withdrawing an appeal MIGHT be considered in itself to be unreasonable behaviour for which an award of costs MAY be pursued. In a system where we are frequently told that appealing to the Secretary of State is our only option against recalcitrant authorities we will continue to stress the importance of the appeal system as a tool as well as a process and that withdrawal of an appeal made as a way of bringing decisions to a head is neither unreasonable behaviour nor a reason for an award of costs in its own right. The consultation closes on 20 February. Any comments should be sent to Andrew Whitaker, our Planning Director, at the HBF London office (Andrew.whitaker@hbf.co.uk). Section 106 negotiations On a more positive note we are receiving some anecdotal evidence of some local planning authorities being open to discussions over existing S106 agreements to reduce obligations or reschedule payments in order to assist delivery of key sites. There are, of course, just as many stories of authorities who continue to deny any effect of the current economic situation on the scope for developer contributions to fund their policy requirements which is both frustrating and deferring development in their areas. We are always interested in member feedback of either type of experience, particularly if such decisions have been made through the appeal process. TECHNICAL AFFAIRS Gas flues in ceiling voids – update The HBF Gas Flues Sub Group met early in the new year to review the current situation on this issue. The Sub Group concluded that there was no justification for major changes to the present HBF guidance. It was agreed that clarification to the guidance surrounding occupied properties should be added to the note along with a link to the HSE safety alert ‘Gas Flues in Ceiling Voids’ which was issued on the 2 October. This revised guidance is due to be issued to members very shortly. Whilst the HSE believes that the industry should go back beyond June 2007 in arranging flue integrity inspections, the Sub Group felt that there was no over-riding justification for such a requirement, unless that is, the HSE has more detailed information concerning the unfortunate fatality early in 2008. HSE has been questioned at length in this regard, but as yet no further information has been forthcoming. The HSE, who attended part of the Sub Group meeting, has concerns about the adequacy of fitting of carbon monoxide detectors. The Sub Group pointed out, however, that its advice clearly indicates that fitting detectors is a secondary safety feature while we await the formal report’s findings. Discussions continue with CLG, HSE, Corgi and NHBC. Section 38 Agreements and commuted sums Following the submission of our position paper, we met with representatives from the Department for Transport (DfT). We discussed the fact that the draft guidance document entitled ‘Commuted sums for future maintenance in relation to Adoption and Transfer of Infrastructure Assets’ had already got into the public domain and was being applied and relied upon by a number of Highway Authorities. DfT confirmed that this should not be happening given that the guidance is merely for consultation. Further discussion on this will take place at the next DfT steering group meeting. The HBF’s own group is due to meet again in early February to discuss the position further, by which time it is hoped that we will be in possession of further information from the DfT steering group. Building Regulations Part G (Sanitation, Hot Water Safety and Water Efficiency) This is still due out in April, for implementation on all new building regulation applications after the end of September. Part F (means of ventilation) and Part L (conservation of fuel and power) The consultation documents for these are nearing completion and are expected to be out in April. This should include a revised SAP methodology. The revised methodology will need to be looked at very carefully and we will need to know how it compares with the one currently being used by industry. Once the consultations are released we will be setting up working parties to consider the industry response. Part A (Structural Safety) and Part C (Resistance to moisture and weather) The consultation documents for Parts A and C are now being prepared. Although no firm date for their release is available they are expected to follow Parts F and L If you have any queries regarding any of the technical issues detailed above please contact HBF’s Technical Director Dave Mitchell – dave.mitchell@hbf.co.uk or on 0207 960 162 Forthcoming events I am extremely pleased that Housing Minister Margaret Beckett has agreed to address our annual industry lunch on 22 April that will take place at the Hyatt Regency in central London. Despite the current climate, the event provides an opportunity for colleagues to meet and discuss the challenges facing our industry. Click here for details of the event We have also now finalised the speaker list for our annual policy conference on March 17 at the Royal Society of Arts in central London that this year will be entitled ‘Building towards a brighter future’. Speakers include shadow housing minister Grant Shapps, Sir Bob Kerslake, Michael Coogan – director general of the Council of Mortgage Lenders and John Callcutt. Click here for further details AND FINALLY... There are undoubtedly another challenging 12 months ahead, but please be assured that throughout 2009 HBF will be working ever harder to represent you on the wide range of issues currently facing or industry. Please do not hesitate to contact me or any of the team here at HBF should you wish to follow up on any aspect of this report or indeed raise any other matter.
