KEY ISSUES In another extraordinary month, the housing market has continued to be affected by the problems engulfing the wider economy and banking sector, and the resultant lack of mortgage availability and drop in consumer confidence. We must hope that the steps taken last month by Government to stabilise the banking system, allied to the interest rate cuts announced by the Bank mean that more normal levels of mortgage lending will be restored in the near future. Indeed when making the announcement last month, Chancellor Alistair Darling said that one of the conditions of the Government injecting capital in to the banks was that they restored lending to “2007 levels”. And whilst I am not sure this would be possible or even desirable in the current climate, the premise that Government insists on some sensible levels of lending must be followed through. I welcomed the Bank of England’s Monetary Policy Committee’s decision to finally cut interest rates decisively twice in just a few weeks, something we have been calling for since April. With the economic situation as it is, and the evaporation of fears with regard to inflation, the cuts in the base rate were desperately needed. I hope in the coming months further cuts are made if necessary to assist the housing market We met with Sir James Crosby as he completes his review in to mortgage availability- on which more below. It must be hoped that the recommendations he will be publishing in advance of Darling’s Pre Budget Report are acted upon. Restoring mortgage supply is the key issue to addressing the current situation and Government action is absolutely critical. We will continue to push them at every opportunity. We welcomed a new Housing Minister, Margaret Beckett, in the September Government reshuffle and I was delighted that just a few days into her role she came to speak to us at the Housing Market Intelligence Conference. Her message was simple, but important. She recognised the very real difficulties facing us and said that her door was open to any suggestions we could make to improve matters – it is a very promising start. We have an initial meeting planned with her for later this month and moving forward I will certainly take up her offer wherever we see a need to do so. While Ministerial continuity is of course the ideal, particularly at such a challenging time for us all, Mrs Beckett brings with her a wealth of political experience and the respect of her peers. I very much hope therefore that once she has got up to speed she will prove an effective advocate in Cabinet – we very much need one in the current climate. ECONOMIC NEWS Policy Shift The past weeks have seen a dramatic shift in the economic policy environment. The MPC finally woke up to the risk of a serious UK recession and dramatically slashed interest rates twice. This about-turn vindicates HBF’s position. We had been calling for a half percent cut as long ago as April and pointing to the importance of the housing market for the wider economy. Unfortunately lower official rates seem to have so far had little impact on high street mortgage rates and we have been very vocal in our calls that the Government ensures the rates are passed on to home owners. I do not pretend lower interest rates are the solution to all our problems on their own, but they will help, and I hope that in the coming months if further cuts are necessary the Bank is again as brave as it has been in recent weeks. On the same day (8 October) as the MPC announced its initial half percent rate cut, the Treasury took draconian steps to help resolve the banking crisis. While none of the measures was designed directly to assist the mortgage market, the Government raised hopes when it said the banks being supported by the recapitalisation had agreed a range of commitments, including “maintaining, over the next three years, the availability and active marketing of competitively-priced lending to homeowners and to small businesses at 2007 levels”. Unfortunately, the Government has not yet explained exactly what this commitment means in practice, nor how it is to be implemented. Indeed, a senior executive from one of the recapitalised banks publicly rejected any notion that the UK Government will have an impact on the bank’s lending policies or conduct of business. Government Contacts In early October HBF arranged for a group of senior home builders to meet Sir James Crosby, who is carrying out a review of mortgage finance for the Treasury. We were able to explain the scale of the crisis in the housing market and house building industry, stress that solving the mortgage famine is the key to restoring the market, and demonstrate how the mortgage famine and down valuations are affecting home builders. We also explained that affordable housing supply, now so closely linked to private housing delivery, was likely to fall sharply. We also of course continue to keep in close touch with Michael Coogan, Director General of the Council of Mortgage Lenders, and his team. In early November we are holding meetings with officials at the No.10 policy unit, with Yvette Cooper, Chief Secretary to the Treasury and former Housing Minister, and with the new Housing Minister Margaret Beckett. Our meeting with Yvette Cooper involved a number of senior representatives from the HBF membership and provided an excellent opportunity to update her on the conditions the industry is facing. Taking place against the backdrop of the Bank’s dramatic 1.5% cut in rates, we were able to press for action to ensure that the benefit is passed on to borrowers alongside action to rebuild mortgage liquidity following the recapitalisation package. We also made the case for redeployment of the existing Housing Corporation budget for 2008 - 11 in view of the clear risk that it will not otherwise be taken up and for suitable fiscal measures to support the market. Our first meeting with Mrs Beckett will be a valuable opportunity to identify for her the big, priority issues facing the industry, both short and long term. In all these meetings I will of course impress upon them the scale of the problems the industry is experiencing, and we can hopefully discuss further measures the Government might take. OFT Code of Conduct We continue to work with NHBC and other stakeholders to progress an industry Code. The first milestone set by the OFT Market Study report is to have a body to administer this Code established by the end of December. We are confident this deadline can be met. EXTERNAL AFFAIRS Parliamentary interest in the housing slowdown It is notable that both the Treasury and CLG Select Committees are holding one-off evidence sessions on the housing market slowdown and related issues. This confirms the political importance of housing as well as the industry’s significance as a link between the global financial turmoil and the state of the real economy. This is of course a message we have been communicating for several months, but it is reassuring that the political world is increasingly understanding the point. We have submitted a written response on behalf of the industry to the CLG Committee for their ‘Housing and the Credit Crunch’ inquiry, and I am pleased to say that we have now also been invited to give oral evidence at the Committee session on 24 November. The Environmental Audit Committee also this month released its conclusions to its ‘Greener homes for the Future’ review, to which HBF contributed evidence. Its main conclusion was that the Government should review its house building targets and instead focus on delivering more environmentally friendly housing - not one the Government appears ready to accept. Dialogue with the Conservatives Several of you participated in what I felt was a very useful Chatham House discussion with the Conservatives’ Shadow Housing Minister Grant Shapps at their Birmingham party conference. The signs are encouraging that the Conservatives are increasingly prepared to enter into dialogue with us, both on how to combat the current market slowdown and on their longer term policy thinking. As the next General Election approaches and focuses minds we will continue to make every effort to build on the recent Birmingham dialogue. While there are clearly issues about how a Conservative “localist” vision would wash, the important thing is that we can debate these on a constructive basis founded on trust. Zero carbon The key issue remains the definition. We still await the Government’s further consultation on this matter, but I feel it is, on balance, positive that this is so. The work undertaken earlier in the year by the UK Green Building Council and the follow up to this has shown that it is in most cases difficult for developers alone to deliver zero carbon. The consequence is that we need to revise the existing definition adopted in the Code for Sustainable Homes, allowing in practice for a more flexible approach. The formulation of such an approach is far from straightforward however, hence the delay to the consultation process. We will of course remain closely involved in this process with the over-riding objective that wherever we end up is a practical and deliverable solution. Feed-in tariff Pending resolution of the zero carbon definition, we have noted that the new Secretary of State for Energy and Climate Change, Ed Miliband, has indicated the Government’s intention to introduce a feed-in tariff for small-scale renewable electricity generation and to consider an incentive for renewable heat. I believe this decision in part reflects the lobbying we have undertaken on this issue The details of these proposals will be critical, but if they are properly framed they could be of real benefit in reducing the front-end capital costs of zero carbon. We will therefore continue to press for our considerations to inform policy making in these new incentives. PLANNING AFFAIRS Community Infrastructure Levy (CIL) As the Planning Bill reached its advanced stages in the House of Lords the development industry appears to have won our battle with the Government to remove the Clauses which refer to CIL relating to land value. This significant change reflects the discussions we have held with CLG at which they have consistently agreed that CIL is not allied to the former proposal for Planning Gain Supplement (PGS) which was, of course, a tax on uplift in value brought about by the grant of planning permission. The amendments are reinforced by the proposal to repeal the Planning Gain Supplementary (Preparations) Act 2007 which allowed local authorities to spend money in preparation of PGS legislation. In effect this means that another Act of Parliament would be required to implement any form of PGS. With regard to CIL, the Bill continues to be a very wide ranging, enabling Bill rather than fixing many of the details of how CIL will operate. These details will need to be set out clearly in the regulations which are not expected to be published for public consultation much before late Spring 2009. Given that the regulations will be the subject of both public consultation and parliamentary scrutiny it is unlikely that CIL will be commenced much before the end of 2009 and, more likely, in April 2010. HBF continues to discuss the details of the operation of CIL with CLG and other interested parties such as commercial developers and local authorities and their representative bodies. Our requirements of CIL remain the same as they have always been: namely a simple, transparent process of setting a single payment to replace currently negotiated Section 106 contributions towards community infrastructure set at a level which retains and reflects site viability. We will continue to be committed to discussions over the details of the operation of CIL at this stage, and work towards influencing the debate over the draft regulations such that we reach the most agreeable solution for our industry. Regional Working Following the HBF restructuring process we went through over the summer, as discussed we have now held most of the regional meetings around the country explaining the new focus of our regional planning work. The various Regional Spatial Strategies (RSSs) continue to be our priority and we have recently made representations on the Secretary of State’s proposed changes to the plans for the East Midlands, the South West and the South East. With strategies already adopted in the East of England (albeit that it is subject to a judicial review by Hertfordshire County Council) and the three northern regions, we are just one piece short of the RSS jigsaw being substantially complete. The West Midlands RSS is the last to drafted and we will be engaging with as many regional bodies as possible over the coming months with a view to influencing the strategy for our members’ benefit. We do, of course, rely very heavily on our members for input into our responses to emerging regional policy and, under the newly agreed working arrangements. I am grateful to all of you who have committed to continue to help us in our work by representing the industry on a wider level through involvement in strategic housing and land availability work in the regions. TECHNICAL AFFAIRS Gas flues in ceiling voids – update HBF convened a Gas Flues Sub Group comprising technical staff from various member companies to consider the most appropriate advice HBF should proffer to members pending publication of the HSE report. The main HBF Board have considered the conclusions this group reached, and following consultation with other member groups a suggested course of action was issued to members on 26th September. HSE issued their expected Safety Alert - ‘Gas Flues in Ceiling Voids’ on 2nd October The publication by HSE of its final report into the incident is still awaited and clearly until such time as it is available we will not be in possession of all the facts. In addition, CORGI has set up a review group, that includes HBF, to look at its Technical Bulletin 200. We continue discussions surrounding this issue with CLG, HSE, Corgi and NHBC. Building Regulations: The Future of Building Control The responses from the Future of Building Control consultation have now been published - the document can be accessed via the Communities and Local Government website. CLG intends to follow up the Summary of Consultation Responses with an Implementation Plan outlining how this will be taken forward. Part G (hygiene) Consultation closed back in August and all the responses have now been considered by CLG. The proposed new Part G will be titled ‘Sanitation, Hot Water Safety and Water Efficiency’ and is currently due to come into force in April 2009. Part F (means of ventilation) and Part L (conservation of fuel and power) Three month consultations on parts F and L are due to start in spring 2009. The current intention is that these will come into force in April 2010. HBF will be setting up working parties to look at and consider the industry response. Definition of Zero Carbon A consultation is due out shortly on the definition of zero carbon. This will probably be one of the most important consultations we have seen for some time and will have a big impact on the direction towards 2016 – zero carbon homes. This will also feed into work being done by the zero carbon hub. HBF will be setting up a working group to look at and consider the industry response. S38 Agreements and commuted sums HBF is continuing to analyse the current situation regarding commuted sums through its working group. We would like to hear from any of our members who have been successful in using Section 37 as an alternative. If you have any queries regarding any of the above please contact HBF’s Technical Director Dave Mitchell – dave.mitchell@hbf.co.uk or on 0207 960 1621 AND FINALLY... As you can see, there are a wide range of ongoing issues at the moment, some related to the current economic issues and some not. I feel it imperative that our industry is represented in all these discussions as they will determine both how quickly we emerge from the current downturn, and the climate in to which we will emerge and thus our ability to deliver housing in the years to come. The next few weeks will play a major part in determining both of these points, with Crosby reporting, the anticipated Pre Budget Report and also the conclusions of the Killian Pretty review in to the Planning Applications Process. We will continue to work with Government and a range of stakeholders on these and all the other ongoing issues to ensure that the house builder’s position is considered. 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.
