Introduction 2011 has begun at the same hectic pace that 2010 ended and we continue to focus on a range of issues that are vitally important for homebuilders and those associated with our industry. The plight of first time buyers and others unable to access the housing ladder because of the deposit gap caused by the lack of high loan to value mortgages on sensible terms has dominated much of our work in recent months. Early in January the Prime Minister made reference to the point which prompted us to write to him and then this week the Housing Minister Grant Shapps held a much publicised First Time Buyers Summit which John Stewart and I attended. Details of this along with other work we have been doing in this very important area are set out below. The Localism Bill together with the National Planning Policy framework is another area we are dedicating significant time and resources to as both are at critical stages where the opportunity to influence key elements potentially exists. I have also been working actively to ensure the Zero Carbon Hub continues to receive funding and support in the coming year so that the Hub can now focus on how Allowable Solutions might work to complement the excellent work it has already done on fabric efficiency and on site carbon compliance. Understanding the mechanisms and costs associated with Allowable Solutions is vital to provide more certainty for homebuilders. In this report I have described in more detail the work HBF have been undertaking in these three vitally important areas together with an overview of our other activities. First time buyer summit As has been heavily reported in the media, Housing Minister Grant Shapps this week held a ‘First Time Buyer summit’. John Stewart and I attended for HBF alongside representatives from across various Government departments, the Council of Mortgage Lenders, Building Societies Association, Association of British Insures and other housing related bodies. The Secretary of State Eric Pickles attended the final part of the meeting which hopefully demonstrates the importance of this issue to the Government. Whilst clearly there is no magic bullet that the Government or others can fire to solve the problems in the mortgage market, we believe the Government has a key role to play in facilitating discussions between the various parties who could find solutions. Shapps however did make it quite clear that solutions had to be found without recourse to Government cash. Overall I found the meeting positive and constructive and it was extremely useful to talk through issues with representatives from the other parties involved in mortgage lending and to appreciate their concerns – and constraints. The main areas of discussion were; FSA Mortgage Market ReviewShapps is very keen to see a “rapid resolution” to this review by the Financial Services Authority (FSA) as he feels it is creating a great deal of uncertainty. Mortgage Indemnity Insurance (MII)Shapps was made aware that there are various discussions going on involving house builders, lenders, insurers, etc. John Stewart and I suggested the Government might broker a meeting of the various parties. In response, several people at the Summit argued there was no appetite among insurers to get involved in MII, though we know from our own discussions that this is not true. A roundtable of the key parties might at the very least help improve understanding and Shapps is considering how best to advance this suggestion. Shared equity, shared ownershipAll parties agreed that there are issues involving home builders, RSLs, lenders and FSA regulation which need resolving to try to unlock greater potential for these products. RSL balance sheets and Local Authority land holdingsThe Group discussed that RSLs have some £14bn locked up in their balance sheets which, if released, could contribute to a solution for FTBs. Similarly Local Authorities and the HCA have large land holdings which could be used creatively to help with the supply of private rented housing and housing for home ownership. The Minister indicated he would follow up on all of the above ‘workstreams’ in advance of a further meeting in a couple of months. Mortgage supply and bridging the deposit gap As the Summit demonstrated, mortgage availability, and particularly the acute shortage of higher LTV mortgages, remains the most serious immediate constraint on the housing market and new home sales. The Council of Mortgage Lenders (CML) reports that, since last Autumn there has been a pick-up in securitisation activity, but this has not had a significant impact on mortgage availability. Lenders’ ability to expand net lending is constrained by commitments to refinance Government and Bank of England supported funding, a process we understand is running ahead of schedule, as well as a large volume of existing Residential Mortgage Backed Securities and Covered Bonds coming up for redemption. First-time buyer loans are now running at around one third (200,000pa) their levels a decade ago (600,000pa). The number of loans at 90%+ LTV ratios fell from 310,000 in 2009 to only 47,000 in 2009, an 85% decline. HBF sent a letter to David Cameron on 13th January, signed by the chief executives of the 11 largest member companies, expressing our concerns about the mortgage famine and offering a number of positive proposals. HBF has had numerous discussions with a range of organisations, often accompanied by members, to try to find solutions: the CML and lenders, brokers, insurers, officials at DCLG, Treasury and No.10, and private organisations developing products to bridge the deposit gap. Clearly some schemes are now emerging in the market place and we will continue to use our best efforts to facilitate discussions between lenders, insurers and homebuilders. Localism Bill and the National Planning Policy Framework The Localism Bill is currently in its Committee Stage in the House of Commons – the first opportunity for amendments to the Bill to be considered. We – along with a number of members – were asked to give oral evidence to the Bill Committee before the detailed scrutiny of the Bill’s provisions itself commenced. Following this, we are working closely with other housing, planning and development bodies to identify areas of common interest and concern on which we can seek to persuade the Government to make changes to the Bill where necessary. It is fair to say that there is a good deal of common ground with these other bodies on key points we have identified. There is agreement that we need to ensure that the wider localism provisions in the Bill - such as those on holding local referendums or rights to seek to acquire “community assets” - do not inadvertently create additional risks and delays to the planning process. We also agree that in the absence of the old-style regional and sub-regional strategic planning in the new regime the Government’s proposed Duty to Co-operate between local authorities should be strengthened. Equally, if not more important to the current planning change will be the Government’s new National Planning Policy Framework (NPPF). Despite its importance as a key element of the new planning system a public draft of the NPPF is unlikely to be available before May. However, we know from what Ministers have said publicly that its content will be critical to the Government’s declared intention that the planning system should be clearly “pro-growth and pro-development”. The NPPF rather than the Bill itself will contain the presumption in favour of sustainable development and, we believe, key housing obligations such as the need for Local Authorities to undertake proper assessments of their area’s housing requirements and to provide a forward land supply to deliver these if local plans are to be sound and adoptable. More generally, the wish of Ministers to strip down the current PPSs and ensure the NPPF becomes the single, concise and non-prescriptive source of national planning policy means that it is potentially an opportunity to free the system up, but also something we very much need to get right. The NPPF is therefore a major focus of our informal discussions with Ministers and officials and we are again working with other bodies where we can to promote common approaches. HBF will also submit proposals to DCLG’s consultation seeking ideas for the NPPF which closes at the end of this month. Other areas of the Bill are continuing to be discussed in detail through various working groups of which HBF is an active member. We continue to seek to find practical ways of delivering the output of more housing in more places and I believe that this commitment is shared by Ministers. Thus, some of the initial changes we have seen (such as bringing the community right to build under the auspices of neighbourhood planning rather than being completely outside the planning system entirely) appear to be both positive and pragmatic. Although there are still many challenges ahead and plenty of potential dangers of the new system the Government’s mantra of the planning system needing to be pro growth and pro development is starting to permeate much of the detail of the Bill. We now need the same message to be sent loud and clear to Local Planning Authorities across the country and we are certainly trying to get that message across through our many meetings and conference appearances around the country. Zero Carbon Hub Following the submission of Zero Carbon Hub’s interim report recommending future minimum performance standards for on-site carbon emissions (more on this below in the Carbon Compliance Standard Task Group report ), the Hub is now beginning work to look at the options for implementing off-site Allowable Solutions measures under the zero carbon policy. This work is a priority since until we have a clear understanding of the mechanisms for delivering Allowable Solutions and their prospective costs, the industry cannot have the clarity and certainty it needs to be able to move forward with future planning and to factor the overall demands of the policy into future site acquisition decisions. Given the importance of getting this work right and of building on the Hub’s excellent track record to date in bringing all the parties together to work through the knotty issues raised by the policy, I am delighted that the Hub has been able to secure its funding position for the 2011-12 financial year thanks in particular to further support from the NHBC. This support has been vital following DCLG’s decision that it is no longer able to provide financial support for the Hub beyond the end of March, although, as Grant Shapps made clear at the Hub’s very successful inaugural annual conference recently, the Government remains fully committed to involvement in the Hub’s work in other ways. New Homes Bonus We submitted a response to the DCLG consultation and the final scheme design was announced on 17th February. There are no surprises and the announcement confirms that the Bonus – match funding of council tax - will amount to the national average of the band of each (net) additional property. Each affordable home – including those fitting new affordable rent model – will gain local authorities an extra £350 per unit. Outside London, the New Homes Bonus will be split 80/20 between lower tier and upper tier local authorities, i.e. the local planning authority and the county council. HBF has been lobbying government extensively on the New Homes Bonus and although we broadly welcome the financial incentive we still have some concerns that we will continue to raise with ministers and officials. For example, the Government’s own assessment estimates it will only lead to 14,000 extra homes being built, nowhere near enough. Mortgage regulation The Treasury has formally announced that regulation of second-charge mortgages will transfer over to the FSA or its successor organisation. We met the FSA last Summer to begin discussing the impact of such a shift on home builders’ ability to offer shared-equity schemes, and we made strong representations on this issue to the FSA and Treasury in response to their mortgage regulation consultations. We are reassured to know that the FSA and Treasury recognise that house builders have a very special use for second-charge mortgages and that they are keen to work with us to find a way forward. We have another meeting with the FSA scheduled very soon. As far as we know, FSA regulation of second-charge mortgages is still some way off. Burden of regulation HBF also responded to Grant Shapps’ pre-Christmas request for ideas to reduce red tape. Unfortunately, there are no easy answers, with very few things that can be simply abolished. The big-ticked items – zero carbon, affordable housing, other S106 demands and CIL, public open space, measures arising from the Flood and Water Management Act (FWMA) – are certainly far too politically important to be abolished. DCLG, and Government generally, face an enormous challenge meeting the Spending Review commitment to reduce the burden of regulation on the home building industry by 2015. DCLG must quickly find regulations to cut in order to counter the significant additional costs imposed by zero carbon Part L changes in 2010, 2013 and 2016, and Defra must find measures to counter the extra costs of the changes triggered by the FWMA. We continue to hold regular discussions with officials in DCLG, Treasury, BIS, the Better Regulation Executive and No.10 to explore how best to reduce the regulatory burden. DCLG officials have invested a great deal of effort in devising a Local Standards Framework (LSF), with a large guest list (including 11 house builders) invited to discuss the proposal at an all-day seminar in early March. My own view is that although the LSF idea has some merit, it is far too limited to have any significant impact on the cumulative cost burden of regulation. We need a much broader solution. Affordable housing HBF has held a series of member meetings with Homes and Communities Agency (HCA) officials to get to grips with the new Affordable Rent model and its implications for house builders. This model will dominate affordable housing provision over the next four years. The HCA subsequently published its Framework document earlier this week setting out in detail changes in affordable housing provision for the period 2011-15, and to invite affordable housing providers to put forward proposals. The deadline for proposals is 3 May 2011. Initial contracts will be signed in July. A full HBF briefing document is on this is available for download by members; please click here The new model, major cuts in HCA grant funding and the back-loaded nature of the HCA’s programme for the four years 2011-12 to 2014-15 will inevitably bring big changes to affordable housing programmes and S106 agreements. Private rented sector To assist members develop greater awareness of potential opportunities in the private rented sector, HBF has joined forces with the HCA to run a seminar (free to HBF members) on 22nd February entitled ‘The Private Rented Sector Initiative: Lessons Learnt’. Details from rosie.hinchliffe@hbf.co.uk. Planning trends HBF and Glenigan will next week publish 2010 Q4 data for residential planning permissions. This very important new statistical source will allow us to monitor the success (or otherwise) of the new planning system at a much earlier stage than would be possible using data for starts and completions. The report, which will be available on the HBF web site from Monday, is expected to show a continuation of the downward trend in the number of applications granted. 2011 Budget HBF is preparing a submission to HM Treasury in advance of the 2011 Budget. We would welcome positive suggestions for inclusion in our submission, although we must focus primarily on fiscal/Treasury measures. HBF Customer Satisfaction Survey Results from our sixth annual Customer Satisfaction Survey will be published to coincide with HBF’s Spring Policy Conference on 31st March Public campaigning on housing We are continuing to develop additional ways of campaigning publicly to make the case for a better housing supply in line with the conclusions of our work on engagement last year. At the turn of the year we published a further successful report – Building a Recovery – that highlighted the employment benefits that would flow from an improved housing supply meeting requirements across the country. We complemented our national press release on this report with regional releases and this resulted in significant media coverage at local as well as national level. Following this, we are now working on a series of releases highlighting the housing picture – and the shortfall in current supply in relation to requirements - in key towns and cities across the country Labour Party policy reviews The Labour Party has recently launched a number of policy reviews as it begins the process of developing its platform for future elections. The overall theme of the reviews is stated to be to ‘address the threat that the next generation could find life harder than the last’. It is encouraging that one of the reviews is about housing. As I mentioned in my introduction, such public recognition of the problem of constrained supply can only help us as we look for solutions. As announced, this review – to be led by Shadow Communities Secretary Caroline Flint, who we met just before Christmas – will be on “how do we meet families’ aspirations for good housing and a good home?” There is very little information available yet on its scope and scale, but we are in touch with the front bench team and will look to contribute to thinking as the review gets under way. Green Deal for new build In his speech at the recent Zero Carbon Hub’s conference, Grant Shapps also announced that he wanted to look at extending the Government’s Green Deal scheme – to provide up front finance repaid over time to assist people to make energy efficiency improvements to existing homes – to new build homes. The Minister has asked the industry to come back to him with proposals on how the Green Deal could be applied to new homes with a view to this being a means to reduce the initial capital cost of applying the zero carbon policy. This announcement follows initial exploratory discussions we held with officials and provides a welcome opportunity that we will explore with members through the HBF Sustainability Group. CABE It has recently been announced that CABE, as it is currently constituted, will cease to exist after the end of March. A limited number of current CABE staff will, however, transfer to a newly constituted version of the current Design Council which will have a role in promoting both product design and design in the built environment. The Government will make an initial two year financial provision for the new body, but we understand the aim is for it to move to a self-financing basis in the future. The new body’s work on the built environment is likely to focus on national and local design review services. Building regulations compliance roundtable The DCLG Minister responsible for building regulations, Andrew Stunell, recently convened a roundtable discussion with us and other parties to consider questions relating to ensuring effective compliance with building regulations. Building regulations compliance is a particular personal interest of Mr Stunell and so although there were no firm conclusions drawn at the end of the roundtable we would expect the Minister to wish to pursue this issue. One clear theme in the discussion was a recognition by all parties that any discussion about the need for possible action on compliance would require a better evidence base than currently exists. This has been one of our major messages to Government in this field and I think it is helpful that this view is widely shared. Carbon Compliance Standard Task Group The Zero Carbon Hub submitted the interim report to the minister shortly before Christmas. The final report is due to go to the minister around mid February. The last Chairman’s Update reported on the task groups findings. This is such an important piece of work that we have repeated the headline findings below. The carbon compliance standards that have been agreed by the vast majority of the task group are as follows Detached houses 10 kgCO2/ms/yr; approx a 60% reduction from 2006 Part L Attached houses 11 kgCO2/ms/yr; approx a 56% reduction from 2006 Part L Low rise apartments 14 kgCO2/ms/yr; approx a 44% reduction from 2006 Part L The carbon compliance level previously set by the government was 70%. This is a percentage reduction on the 2006 Building Regulations Part L. The task group also supported an option for carbon compliance to be assessed across the whole of a development site. There had been a lot of discussion surrounding the designed v built performance of buildings It is clearly understood that with only 19 houses having been looked at to date, we do not know the potential problem that might exist. Work will need to be done to clearly measure the potential gap and indeed what is causing this. ie through the SAP calculation, work on site, low carbon technologies not performing as manufacturer’s literature etc: The group was keen to look at a robust detail type solution which would include research etc to clearly identify where any problem might exist with a view to closing this apparent gap over a period of 10 years. This will need to happen as the carbon reduction levels decided above are based on as built and not designed. There are still many hurdles to cross in all this. After the minister has seen the final report it will be looked at by Building Regulations Advisory Committee and will be subject to public consultation prior to implementation. Flood and Water Management Act HBF has been tracking this issue long before it became an Act last April. We have had many informal meetings/discussions with Defra, Ofwat and Water UK surrounding the complexities and confusion of this Act and in particular the proposals concerning the Transfer of Private Sewers. Such is the HBF’s concern that we have written to the minister asking for his assistance in clarifying and resolving a number of important issues relating the Government’s proposals for the Transfer of Private Sewers and Mandatory Build Standards for adoptable sewers under the Floods and Water Management Act. The commencement regulation date was due to come into force on 1st April 2011 with the automatic transfer to take place on 1st October 2011. However such is the confused state of affairs that the commencement regulation date has been deferred to 1st July 2011 with the automatic transfer remaining the 1st October 2011. We believe that this delay is mainly due to the questions raised by HBF. HBF has put together a small group from its National Technical Committee to review the current position and to prepare an alternative set of proposals that are better matched to the needs of house builders and which will simpler and more economic to use for all parties. These proposals will be sent to the minister and all other interested parties. There are still two consultations due out shortly relating to the Flood and Water Management Act. Build Standards - we are receiving mixed messages from Defra and Water UK surrounding consultation dates and indeed whether or not it will be a full consultation. Sustainable Urban Drainage (SUDs) standards – we do not believe this will appear as a consultation much before spring 2011. These are two important consultations and HBF will be holding workshop consultation meetings once they are released to formulate an industry response. As mentioned previously we are urging members to try to attend these meetings and submit your own company responses. HBF will advise on workshop/consultations meeting dates as soon as we know when the consultations will be released. In the meantime if you are interested in attending can you please register your interest with Rosie – email rosie.hinchliffe@hbf.co.uk Gas flues in ceiling voids – update. There are no further developments on Gas Flues since the last chairman’s update in December. We will keep members informed on any additional updates. Cross Government work on security standards in residential properties HBF has been asked to attend a ‘call for evidence’ session which will be hosted by DCLG in conjunction with the Home Office regarding work being undertaken across Government in relation to security standards in domestic properties. The ‘call for evidence’ will cover three strands of work; An examination of how voluntary initiatives could be increasingly effective in improving basic home security in new and existing domestic properties and informing consumer choice. Development of a Local Standards Framework and the potential for locally set security standards. Consideration of the case for introducing minimum residential security standards into the National Building Regulations (England and Wales) I will update you on the meeting in my next Update. AND FINALLY… As you can see, there is a lot going on and as ever should you have any questions on any of the issues raised in this report, please do not hesitate to contact me or a member of the HBF team on 0207 960 1600. Finally can I ask you to mark your diaries for two very important events. Our very popular HBF Policy Conference will take place in London on Thursday March 31. This year’s conference echoes many of the issues raised in this report and will focus on the Localism agenda, mortgage situation, affordable housing provision and zero carbon housing. We have assembled a first class line up of speakers including Eric Pickles, CBI Director General John Cridland and Monetary Policy Committee member Professor David Miles. Also please note that our Annual Lunch, preceded as ever by our Council Meeting and AGM will be held in London on Tuesday May 10th. We have asked eGrant Shapps over lunch and this event always sells out very quickly so please ensure you book your place ASAP. Details of both events are available on our website or by contacting Kellie Kent at our office or by email at kellie.kent@house-builder.co.uk I will report to you again prior to Easter
