<H1 class="">KEY ISSUES</H1> Our main focus continues to be the impact of the credit crunch on the housing market whilst continuing to pay close attention to other important matters such as CIL and the forthcoming OFT market study. On the market issues I have personally briefed housing minister Caroline Flint on the situation and we have also held a number of meetings with senior officials across Government. Next week we are meeting with the Chief Secretary to the Treasury, Yvette Cooper, which will afford another opportunity to present the ideas set out in our Housing Market package. In addition to Government, we have met with representatives from the Council of Mortgage lenders to ensure they understand our concerns over the reduction of lending by its members; and the Bank’s Monetary Policy Committee upon who we impressed our views for the necessity of an interest rate cut. Whilst we did not see a cut in June or July, I do believe our representations at least helped stay the Banks’ hand against pressures from other quarters to increase rates. Of course the conditions affecting the housing market have led to greater demands on us to represent the industry’s position to the media, making sure that commentators understand the issues; the causes of the situation; the implications of it in the short and medium term; and pressing the case for Government action on the areas we have set out in our Housing Market Package. David Pretty and I have also been in discussions about a New Homes Marketing Board led Autumn campaign to try and generate some positive messages about New Homes in an attempt to counter some of the constant negative press coverage. ECONOMIC AFFAIRS Market conditions Building on the discussions we have held in the last few months with the housing minister, CLG officials, Bank of England officials, members of the MPC and Treasury officials, in June I accompanied a group of senior home builders to meet advisors to the Prime Minister. We discussed market conditions, stressing the need for urgent Government action to stem the loss of jobs and capacity in the home building industry. We have also continued discussions with CLG, EP and the Housing Corporation about measures to stem the downturn in home building. There has been a response in kind with some initial measures announced by Housing Minister Caroline Flint. We believe the measures are the first part of a wider package of action the Government will be announcing in the next few weeks. This month’s announcement included: The establishment of a new national ‘clearing house’, whereby house builders can approach the Housing Corporation with proposals to sell their unsold stock for affordable housing. It is envisaged that the clearing house will enable money allocated from the Housing Corporation budget to be invested more quickly. We are in discussion with officials as to the details and will brief members as soon as we have further details. A further reallocation of £270m of Housing Corporation money to deliver an additional 3,800 homes for social rent and 1,500 shared ownership homes over the next three years. A change to Housing Corporation payment system to allow more upfront payments to developers delivering affordable and social housing. I have also held regular meetings with Michael Coogan, Director General of the Council of Mortgage Lenders (CML), to discuss the mortgage crisis and its impact on the housing market and home builders. Michael and senior representatives from HBOS and the Alliance & Leicester were guests of the Metropole Group. Unfortunately, the mortgage situation shows no sign of easing, nor is there any obvious early solution. The Bank of England’s Special Liquidity Scheme has not yet succeeded in bringing down three-month LIBOR, and there is no sign of a restoration of wholesale funding for mortgages. The CML’s forecast is still that net mortgage lending in 2008 will be limited by funding availability to £55bn, half last year’s £108bn. Sales incentives and mortgage lenders The CML’s Disclosure of Incentives Form has been finalised and is currently with the Law Society. The introduction of the form is still scheduled for 1 September 2008 although several members have indicated to me that they intend to introduce it earlier. HBF is holding further discussions with the CML about a set of Questions & Answers to help members complete the form, and the precise details of transition arrangements. In addition, we have met the RICS to discuss valuers’ use of the Form and more general concerns about the valuation problems faced by home builders. The RICS will be issuing a change to the Red Book covering valuers’ use of the new Disclosure Form. It is also planning to issue a special information paper on valuation of new build homes. Private rented housing To explore further the prospects for attracting institutional funds into the private rented sector, we have held discussions with the Treasury, a major accountancy/tax firm and a company which channels institutional funds into private rented housing. In the longer term, this could help open up a new source of demand for new homes. We are also promoting the idea of allowing SIPP’s to invest in residential property for rent. OFT Market Study I have held further discussions with the OFT which appears to be taking a constructive and positive approach to its study. HBF has also continued to work with NHBC and other warranty and trade bodies to progress an OFT-compliant Code of Conduct for the industry. These discussions are now at a crucial stage as we work through the detail of the proposed Code with assistance from OFT. We are hopeful of being able to make an announcement at about the same time as the OFT publishes its report, which is scheduled for September. During June the OFT published two important studies as part of its Market Study. (See the HBF web site for briefing notes on both studies and for links to the two studies.) The first, a study of 1,000 new home buyers, contained many very positive findings for the industry and demolished the all-too-frequent claim that home builders build poor quality products. 60% of buyers would recommend their builder to someone else, 18% would be critical and 21% were neutral. 80% said they would be likely to consider a newly built property again (48% ‘very likely’). And 70% said they would be likely to use the same home builder. Most said the quality of finish (81%) and construction (90%) were good. Satisfaction with the service during the buying process was very high (89%), although satisfaction with after-sales service (75%) was lower. The second, a report by KPMG, examined the financing of home builders. This too contained some welcome messages for home builders. In particular it led the OFT to conclude that “the holding of ‘landbanks’ by firms reflects the need to have a pipeline of land at different stages in the development process, rather than a reluctance to develop or a desire to prevent competition”. The Barker Review demolished the landbanking myth back in 2004. The Callcutt Review debunked the landbanking myth again in 2007. Perhaps the OFT’s study will put this myth to rest once and for all. Cumulative cost burden of regulation Four major home builders have made presentations to the Housing Minister on complexity and delay in bringing forward housing development, and the cumulative cost impact of regulation on development viability. These have proved very successful as they have allowed home builders to present hard evidence from real sites. HBF has also continued to discuss the regulatory cost burden with CLG officials and will hold a special roundtable discussion between home builders and officials later in July. EXTERNAL AFFAIRS Conservative housing policy We are stepping up our efforts to engage with the Conservative front bench team and its policy formulation process and have recently met with Eric Pickles the Shadow Secretary of State for Communities and Local Government. The Tories' emphasis clearly remains on localism, but the fact that a Green Paper on housing is planned in the near future shows the door is open for dialogue. We will be exploring the Conservatives’ thinking in more detail and seeking to contribute to its development over coming months. It is important that we engage effectively with the Opposition as we move closer to the next General Election. CSCS initiative I am delighted that in the latest site audit carried out in May, the members of the Major Home Builders Group achieved an overall result of 91% of those on site on the day holding cards. This is an excellent achievement - more than doubling the percentage of card-holding for these companies in only two years. Attention now turns to maintaining this level of card-holding and ensuring that where those on site still need vocational qualifications the support mechanisms are in place to assist them in doing so. Zero Carbon in Wales We met the Welsh Assembly Government Minister for Environment, Sustainability and Housing, Jane Davidson, on 10 June to discuss the Assembly Government's aspirations for moving towards a zero carbon standard for new construction, including housing. The meeting was an opportunity to outline the work the industry and the HBF has undertaken on zero carbon. In explaining the practical and cost issues that need to be resolved, we underlined the importance of suitable renewable energy supply in achieving zero carbon practically and affordably and the need for energy market rules to encourage investment by energy companies in such facilities. The Assembly Government wants to see how far it is possible to progress by 2011 and has asked the Sustainable Development Commission in Wales to advise it. HBF has been invited to contribute to the Commission's work. Launch of the zero carbon delivery hub Following detailed discussions which we have helped facilitate in recent months, a zero carbon delivery hub was formally launched in late June to pull together work on the main practical issues involved in seeking to meet the proposed 2016 standard. The hub's primary role is to project-manage collaborative work programmes involving the key parties in each of the main areas entailed. It is a private-public partnership with initial funding and resource coming from NHBC, Robust Details Ltd and the CLG. Paul King of the UK Green Building Council has agreed to be the interim chair, with Neil Jefferson of NHBC as interim chief executive. I am very pleased that Mike Freshney has kindly agreed to represent both HBF and RD Ltd on the interim board and lend his valued experience to its work. I have always felt that such a body - recommended by John Callcutt's review last year - is important if we are to focus minds and resources in the right way on the very major challenges raised by the zero carbon objective and welcome its establishment. Definition of zero carbon As I write, we are still awaiting publication of the Government's promised consultation document on the definition of zero carbon. Following the UK Green Building Council's report on the definition in May, the 2016 Task Force has been giving further thought to this question. I think we are all conscious that this is a difficult issue to get right and it is welcome that the Government recognises the need for further consultation. Rest assured that we will make every effort to ensure that full consideration is given to the need for the definition to be aligned with solutions for new development that we believe are deliverable in terms of their practicality and commercial viability. Renewable energy consultation The Government has launched a major new consultation on its future renewable energy strategy. This consultation will be important in determining the policy and regulatory framework for the energy industry in seeking to meet the UK's expected EU target that 15% of all our energy requirements come from renewable sources by 2020. For the electricity market - which is probably of most interest to us given the likely limited requirement for conventional space-heating in future new homes - this translates into a need for 35% of power to be provided by renewable sources in 2020. We will be looking closely at the consultation in order to make any representations necessary to ensure that it supports practical and cost-effective energy supply solutions for future residential development. PLANNING AFFAIRS Planning Bill The Planning Bill completed its Third Reading in the House of Commons on 25 June and will now be passed to the House of Lords for their consideration. Although it will be read before the summer recess the substantial debate will not take place until September. As I have previously advised members, most of the controversy, and hence heated debate, has been around the proposed Infrastructure Planning Commission and National Policy Statements to deal with Major Infrastructure Proposals in which we have little direct interest. However, the Bill deals with Community Infrastructure Levy and some more technical planning matters as well. One of the latter was the proposal to set up local Member Review Bodies and remove the right of appeal to the Secretary of State on some (specified) types of planning application. It is gratifying that government are rethinking this proposal in the light of our lobbying. We therefore continue to lobby members of both houses over issues in the Bill such as the proposal to charge for appeals and the removal of the right for appellants to choose the appeal process under which to proceed. Community Infrastructure Levy We are expecting a publication from CLG setting out government policy on how CIL will operate in order to guide discussions at the Committee stage of the Planning Bill in the House of Lords. This publication will be extremely important as it will give a clear indication of how much influence our continued discussions with CLG and other interests have been in shaping the government’s views. There are, of course, specific issues regarding the proposals where we have still not found agreement between government, local authorities and developer groups. However, we continue to sit at the table and constantly seek to ensure that CIL is seen as a replacement to S106 negotiations, not an additional tax on development. Killian Pretty Review The Killian/Pretty Review of the planning application process has published its “Call for Solutions” to the problems identified through its discussions with stakeholder groups and the Sounding Board over the last 2 months. Running until 5 September, the consultation categorises known problems under 5 grouped headings: Proportionality: matching skills and resources (capacity) to planning application demand. Complexity Culture Engagement Process Proposals for change on all of these issues have been raised by HBF members in the past and we will be making a comprehensive response to the call for solutions, drawing on member experiences and our previous submissions to government process changes. The response will be coordinated through the National Planning Committee. Members are, however, also encouraged to make individual representations to the Review team in order that they feel confident in making robust recommendations for change in the report due to be published by the end of the year. Thames Basin Heath SPA Update The SPA saga rolls on and HBF continues to represent the industry’s interests as a non-voting Member on the TBHSPA Board and through officer meetings. All of the Board papers are publicly available via the SEERA website www.southeast-ra.gov.uk The original Natural England Delivery Plan (now the Interim Strategic Delivery Plan) continues to evolve and is now becoming a mechanism for strategic co-ordination of local mitigation initiatives. HBF continues to push for as much consistency and coordination as possible across the SPA authorities but there is considerable resistance to this from the authorities who fear their hands would be tied by a fully strategic approach ‘imposed’ from above. The high court decision on the Hart DC challenge to the ‘Dilly Lane’ appeal is considered significant. The main implication is that competent authorities are now able to take into account mitigation proposals at the appropriate assessment screening stage which can allow findings of “no significant effect” to be reached without the need for a full appropriate assessment having to be carried out. TECHNICAL AFFAIRS The Future of Building Control – response to consultation The HBF response is available on the website. Several of our suggestions for improving the Building Control system were included - we are particularly pleased that they intend to structure reviews of the regulations and ensure that all the information is available for 6 months prior to the implementation date. In all the proposals look promising. Building Regulations Part G (Hygiene) - consultation HBF has organised a group of members to discuss the industry response. The key proposals are to design for 125 litres per person per day and to include additional safety measures for hot water storage. S38 Agreements and commuted sums HBF has asked members to give us details of where they are paying commuted sums and how much they are being charged so that we can understand the scale of the problem. We understand that Leeds City Council has decided to abandon its attempts to charge developers for street lighting maintenance and this clause is now being removed from their S38 agreements. Code for Sustainable Homes The Nil Rating Certificate for those not having their homes assessed is available to download from both the HIPs and the Code websites. Utilities There have been several recent current consultations from the regulators and HBF has asked members to send in any comments. Waste matters Defra published a consultation on a Soil Strategy for England, although we understand that the proposed EU Soil Directive is still under discussion. Our main concern remains any presupposition that soil sealing should be avoided though it is clear that the issue of crops grown for food vs. bio fuels will now be a key area for discussion. HBF has responded to the consultation Pitt Review The Pitt Review was published on 25 June and as expected contained multiple recommendations. The key issue for house building would appear to be the presumption that housing will be built in flood plains but that legislation should require it to be ‘flood resilient’! This appears to relate to concerns that so many householders are not back in their homes after the 2007 summer floods. There is a similar misunderstanding about surface water drainage with the expected suggestion that new developments should not connect to surface water sewers. Unfortunately, although research demonstrates that last summer’s events were due to an unprecedented combination of weather patterns, the general view remains that climate change will make such events more common. AND FINALLY... Clearly the market is the number one priority of our senior management team, but HBF will of course continue to work on other key issues such as the burden of regulation, the CIL, OFT, the planning system, building regulations and the Code for Sustainable Homes. These will be critical once the current market situation eases. No doubt you will have noticed that this update is a few days later than usual and unless any critical issues unfold in the coming weeks, in which case we will notify you at once, our next update will appear at the end of August. In the meantime as ever please contact me personally or any member of the team if you want to discuss any aspect of this report or any other issue.
