KEY ISSUES Action to assist the housing market remained very much at the top of the agenda throughout the summer. We continued to engage Ministers, senior officials and the Bank and have seen our key messages understood by both Government and the media. As we moved into August there was no let up in activity. Rather the talk was of a housing market rescue package in early September – something that bore fruit last week with the announcement of a stamp duty holiday for sales up to £175,000 and a package of housing measures from CLG. Whilst any help is clearly welcome much more needs to be done – most importantly action to tackle the restricted availability of mortgage finance for home purchase. This is skewing normal market adjustment and artificially reducing transaction levels and prices. We will maintain our pressure for a suitable intervention on this issue, working closely with other key organisations such as the CML. HBF has not of course been immune from the pressures you are all feeling. We too have had to look hard at how we can adjust to current circumstances and I have written to you all separately about the action we are taking in this regard. We have had to take some difficult decisions, but our guiding principle has been to ensure an effective future service for you as members on the key issues affecting the industry. ECONOMIC AFFAIRS Housing and mortgage markets The Government announced a package of housing measures on 2 September. HBF issued a briefing note to all members (please click here to view). For house builders, the key measures were: £300m for a new HomeBuy Direct shared-equity first-time buyer scheme for newly built homes. HBF has been working closely with the Housing Corporation, CLG and EP in recent weeks to design this scheme so that it is as developer-friendly as possible. Final details will be agreed in the near future and we will let members know as soon as possible how to apply for these funds. A stamp duty exemption, from 3 September for one year, for all homes valued up to £175,000. Bringing forward £400m of investment in the current three year Housing Corporation budget for social housing from 2010-11 to build additional units earlier. Whilst we are pleased that a package has been announced, especially the measures above which we had proposed in our Housing Market Package submitted in April to Treasury and CLG, I readily accept that the scale of the package falls a long way short of what we had been calling for. Indeed, without action to increase the flow of mortgage funds, I believe it is fair to say that a recovery in the wider housing market will be some way off. We understand Sir James Crosby will submit his final report on the mortgage market to Treasury by the end of September. If the Treasury does decide to take action to help restore mortgage funding, this is likely to be announced in the Pre-Budget Report (PBR). While the date has not been announced, we hope this will be in early-mid October. The Government is clearly, however going to find it even more difficult to design such a measure following the public position taken by the Governor of the Bank of England, Mervyn King against any such intervention. Speculation during August about a stamp duty holiday caused considerable concern to house builders and estate agents, and we wrote to the Chancellor immediately after the media stories emerged asking him urgently to resolve this situation. It is therefore a relief that this uncertainty has been lifted without having to wait for the PBR. However the Chancellor’s comments about the state of the economy in an interview with the Guardian were most unhelpful. The Bank of England’s prognosis for the UK economy, while not as bleak as the Chancellor’s, indicates zero growth in the UK economy for the next 12 months, with the balance of risks suggesting growth may well turn negative at some point over this period. We have continued to maintain close dialogue with the Council of Mortgage Lenders (CML) about the mortgage famine and issues relating to new homes. Michael Coogan, CML Director General, was the guest of the Major Home Builders Group on 2 September where he affirmed CML’s commitment to working with the industry to improving mortgage liquidity. We have also met the Director General of the Building Societies Associations (BSA). We need to establish close links because the BSA is gearing up to cover mortgage policy, previously the exclusive preserve of the CML. CML Disclosure of Incentives form The most important practical development to report this month is that the ‘Disclosure of Incentives’ form came into effect on 1 September. Copies of the form and a frequently asked questions (FAQ) sheet are available on the HBF website, along with a special email address (CMLDisclosureFormEnquiries@hbf.co.uk) for any members with questions or suggestions about the operation of the form. In due course we will probably need to issue a revised FAQ as unforeseen issues arise. The CML has now made available an electronic version of the form which members can download and add their own logo for internal use. RICS (The Royal Institute of Chartered Surveyors) has indicated that HBF will be consulted as it drafts its new information paper on the valuation of new build homes. RICS is hoping to complete this by the end of the year. OFT Code of Conduct HBF has continued to discuss setting up a customer code of conduct with the OFT, NHBC and other stakeholders. As indicated in my previous update, we hope to announce further details at the same time as the OFT publishes the final results of its market study in late September. TAX POLICY Threat to labour only sub-contractor (“LOSC”) status HM Treasury has set up the Construction Employment Forum to review inter alia self-employment status within construction in general and house-building in particular. Unions UCATT, Unite and the TUC are actively campaigning for a review in light of what they describe as “false self-employment” in a new drive to reduce LOSC and increase payroll numbers. The forum has meetings scheduled for later this month and we, together with other employer representative bodies and the CBI, will continue to defend the current CIS arrangements. Council tax on empty properties We continue to press both HM Treasury and CLG for a review of the practice adopted by district valuers throughout the country of anticipating for council tax purposes the “completion date” for new properties by the current build status of work in progress and assuming “normal” build programme execution. This completion date is the trigger for commencement of council tax and can result in tax being levied on mothballed production in the current market conditions. The application of the guidelines on completion date also varies enormously between local authorities and effectively creates a postcode lottery for developers. Review of business rate on show houses and show homes We are in discussion with the Valuation Office Agency (VOA) about the forthcoming 2010 revaluation of business property. This affects the valuation of show houses and show homes. The current draft proposal from VOA is to increase the rent capitalisation factor from 5.5% to 6% and to increase the assumed cost of garages used as sales offices within show complexes to £1,250 per double garage. This is a slight increase over the figure set at the last (2005) revaluation. We have an opportunity to provide evidence that the increase in capitalisation to 6% is unreasonable and unrepresentative of market yields at April 2008 which is the relevant date for measurement. The VOA proposal is based upon evidence of show house sale and lease-back arrangements over a 2 year period from 2006 to 2007. Threat to VAT zero-rated status from temporarily renting out new-build properties We are working with HMRC on the drafting of a guidance note on the implications of temporarily letting new-build properties which could affect the VAT status of developers. This note should be available for circulation to members in the next few days. EXTERNAL AFFAIRS Discussions with Government We have continued to impress on Government the need for early action to assist the housing market. In addition to our regular Ministerial contacts, John Stewart and John Slaughter met officials at No.10 in late July to update them on conditions and set out the benefits the package of ideas HBF has put to Ministers would have in tackling the combination of factors affecting activity levels. We have also briefed special advisors at CLG. Contacts with the Conservatives We have continued to engage and develop dialogue with the Conservative front bench team as their policy formulation process moves forward. In August we were invited to take part in a private housing seminar with party leader David Cameron at which a number of other members of the Shadow Cabinet were present. This was a good opportunity to encourage the Conservatives to support intervention to assist the market, particularly the need to tackle the constraints on mortgage finance. We are following up the seminar with further contacts and will also be meeting Shadow Housing Minister Grant Shapps to discuss the Conservatives’ forthcoming Housing Green Paper during the party conference in late September. Separately, John Slaughter has met Shadow Environment Secretary Peter Ainsworth to brief him on the zero carbon objective and related policy issues. Skills We have sought the urgent attention of ConstructionSkills and Ministers to help safeguard existing apprentices whose position may be at risk in current conditions. We raised the need for early action directly with Skills Secretary John Denham at a meeting in early August. Mr Denham asked his officials to work with ConstructionSkills and the industry to this end. The Prime Minister also supported such action in his speech on the housing package this week. The need to protect skills capacity and to plan for a future recovery was also discussed at a HBF seminar with CLG and ConstructionSkills in mid-August. The proposals emerging from the seminar will be put to a Ministerial housing skills summit to be held in the autumn. Zero carbon We still await the launch of the Government’s promised consultation on the definition of zero carbon following the UK Green Building Council’s report recommending a more flexible approach. Discussions within and with Government are continuing. We have also continued to join other organisations, including the Renewable Energy Association, in calling for the introduction of a suitable feed-in tariff to improve the commercial viability of new renewable energy facilities. Such a tariff would be one means of helping to make a suitable definition of zero carbon more affordable, but getting the definition right is of course the key requirement. PLANNING AFFAIRS Community Infrastructure Levy Our discussions with CLG and others over the proposals for Community Infrastructure Levy (CIL) continue. The publication of the government’s second policy document, outlining more principles and details of the new charge is the first opportunity we have had to take stock of where Government thinking has moved to and the outcome of our discussions at both policy and practice levels of discussion. An HBF summary and briefing note of the document was issued in August and is available from the HBF website. We have invested considerable time and resources (both staff and members’) in our discussions over CIL and it is, therefore, slightly disappointing that the document leaves a number of fundamental threads of the proposals hanging. While on the one hand this leaves the door open for further debate and influence, on the other it reinforces the perception that CLG has a very different vision of CIL to ourselves, other developers and, perhaps more surprisingly, local authorities who seem more aligned to our own requirements of the charge. The policy document, like most of the discussions with CLG, focuses more on how the charge will be set and collected. It does not deal with the equally (if not more) important issue of how the money will be spent and how viability of sites will be maintained, particularly in times of market downturn. We are continuing to stress to CLG and other parties that the initial reason for the development industry proposing a fixed levy was to reduce and replace as much of the uncertainty around Section 106 negotiations as possible. It is clear that some officials have trouble in moving away from the idea of CIL as an additional charge on development – a view which we have never promoted, do not accept and, in a falling market, recognise is both unaffordable and unsustainable. Killian Pretty Review HBF has submitted a detailed response to the Killian Pretty Review “Call for Solutions” for a faster and more responsive system for planning applications. This had been drafted following the last round of regional meetings and a lengthy discussion at the National Planning Committee. Our submission stressed that we consider there is no magic bullet that will change what is essentially a complex and bureaucratic process. However, that is not to say that the system could not be made more efficient and effective. We have been supportive of the review process not least because we have long complained about the unnecessary complexities of the planning application system. Any changes that simplify the process of making a planning application are to be welcomed. Ultimately however for any changes to the process to succeed changing attitudes and culture back to facilitating development rather than controlling it will be vital. Planning Delays HBF has been in contact with Professor Michael Ball who is completing a detailed study of delays in gaining planning permissions which we understand will support the findings of our own Planning Timelines study in 2006. I understand a number of members helped Professor Ball with his study. We have also met the National Audit Office (NAO) which is carrying out a similar study. Building for Life Changes published at the end of July to Government core output indicators for regional planning bodies and local planning authorities to report on in their annual monitoring reports (AMR) introduced Housing Quality as a new output. AMRs should now collect data on the number and proportion of total new build completions on housing sites reaching very good, good, average and poor ratings against the Building for Life (BfL) criteria. Widely reported in the press as allowing local authorities to set targets for design quality this is not actually the current implication of the new indicator which is a monitoring tool rather than a target requirement. HBF has been committed to the Building for Life as a founding member of the BfL partnership, originally between ourselves and the Civic Trust and latterly between HBF, CABE, EP and the Housing Corporation. BfL is the only objective assessment of design quality albeit that many of the 20 assessment criteria require an element of subjective opinion. We have, however, always seen BfL as an assessment tool or standard rather than a competition or to establish a minimum points target as a material consideration for granting planning permission. We have, on a number of occasions, publicly expressed our concerns and disappointment of the approach of the CABE audit of housing quality and we will continue to do so. However, the changes to local authority monitoring requirements as announced is a worrying step and will, as a minimum, encourage many local authorities to require a BfL assessment to be submitted with every application. It is then only a small step towards local authorities seeking to adopt a minimum BfL score as part of their determination criteria, or worse, for validation of an application. We are, therefore, continuing to talk to CLG and CABE about the use of BfL as a planning tool with a view to retaining its current value as a non competitive, objective assessment of design quality. Full details of the Building for Life criteria and its use can be found at http://www.buildingforlife.org TECHNICAL AFFAIRS Gas safety You will probably be aware that earlier this year a person died from carbon monoxide poisoning a few months after moving into a new flat. Any such fatality is of course of concern and we have therefore been liaising with the Health and Safety Executive (HSE) on their investigations into the causes of the incident. HSE’s priority is to establish as clearly as possible the scale of the use of the installations of the type involved. (Many thanks to those of you who have replied to the questionnaire recently sent out. We are still able to feed this information into the research for those of you who have not yet been able to collate the information required – so please forward when complete.) We will of course continue to liaise very closely with the HSE over this matter. You may not be aware that as of April 2009 CORGI will no longer be the body that accredits gas installers as HSE has granted the tender to Capita who will be creating a new brand for HSE to retain in future years. There are no details yet of how this will be transferred from one organisation to another. We have indicated to HSE that this needs to be managed very carefully during the transitional period. Building Regulations Part G HBF has responded to the consultation suggesting that it would be better to defer this amendment and consider both Parts G and H together (in line with the proposal in the Future of Building Control consultation earlier in the year). For a full copy of the HBF response click here. Building Regulations Part F and L (2010) HBF has taken part in the Industry working groups looking at Parts F and L. The groups have been reviewing the progress since the 2006 changes with a view towards the consultation which is due in early 2009. We will be setting up working parties to respond to these consultations. Lifetime Homes Standards (LHS) The Government has recently committed itself to supporting the uptake of LHS. The intention is to see if there is sufficient voluntary uptake by house builders of lifetime homes by 2010 (no definition of what sufficient means has been published). If there is not then they will look at consulting on a proposal to include LHS in the building regulations from 2013. They have also said that all publicly funded housing will be built to LHS by 2011. Lifetime Homes is at the moment mainly voluntary in England. Developers are often asked to comply with them on Government-funded work and occasionally via a planning condition. Lifetime Homes are at present a voluntary element in the Code for Sustainable Homes but will become mandatory at Level 6. HBF has established a small group which is meeting which is assessing this and will be meeting with CLG. Code for Sustainable Homes We continue to hold our quarterly meetings with CLG and BRE to discuss technical queries and the process of compliance with the code. If you have had any experiences in these two areas or indeed anything else to do with the Code for Sustainable Homes, HBF would be pleased to know so we can feed them back to CLG and/or BRE. S38 Agreements and commuted sums HBF is continuing to analyse the current situation and a working party has been set up to discuss options for dealing with it. While encouraged by Leeds City Council’s acceptance that they should not charge developers for future street lighting maintenance, other authorities continue to demand payment from developers for adopting public highways, and the problem is increasing. A recent draft from the Department for Transport (DfT) has not helped since, while it contains some useful proposals for setting limits on charges under S278, it also encourages authorities to seek as much money as possible with S38 Agreements. National Technical Conference The conference this year takes place on Wednesday 12 November 2008 at the National Science Learning Centre, University of York. The morning session will provide up to the minute information on Part G as well as progress on the proposed 2010 changes to Parts F and L. The Code for Sustainable Homes will be reviewed as well as a look at the future direction of travel for building regulations. The afternoon session will focus on zero carbon homes and a look at the new Zero Carbon Hub. For further details please contact dave.mitchell@hbf.co.uk AND FINALLY... I am sorry to have written at such length but these remain very challenging times with a lot going on in addition to the current market difficulties. I am committed to HBF working hard to represent your interests in this climate and we will do everything we can to work for the further interventions needed to help the housing market stabilise and begin to recover. As ever, please do not hesitate to contact me or other members of our team if you wish to discuss the general position or any of the issues covered in this update. E-mail: info@hbf.co.uk
