Good morning all and welcome again to HMI. In particular I am pleased to welcome the new housing minister, Margaret Beckett, who will be joining us at around 10.45, so before that Doug Godden of the CBI and I will do our best as your warm up act. I am sure we all appreciate that just a week in to what we all know is a very complex brief, it would have been very easy for Mrs Beckett to plead a prior engagement and not join us today, and I would therefore like to especially thank her for coming to speak to us. I am sure you will agree it sends a strong message that she is determined to get to grips with the issues with which we are all faced – which in these difficult times is extremely pleasing to hear. Since we last met at HMI a year ago a lot has changed, with events unfolding so quickly at times its almost impossible to keep up with the news and the environment we now find ourselves in is without doubt the most challenging any of us will ever have faced. In tune with these changeable times, Caroline Flint has moved to become Minster for Europe and Margaret Beckett last week became the third housing minister in this astonishing 12 months. A lot of people have remarked to me in the past week how frustrating it must be that we have another new minister in position with whom we now need to get acquainted. And whilst I understand their concerns, we need to realise that changes are a part of how a Government works and also balance them against the fact that our new minister is a proven politician, a heavyweight if you will who comes with a political CV that commands respect. I would suggest that is exactly the sort of person we need on board at this time. I’m sure she already realises the scale of the challenges both the Government and the industry face. This is a time when getting Government measures to assist the housing market right is truly of national importance and I look forward to working with her to ensure we deliver the houses this country so desperately needs once the economic crisis has passed. She joins us in extraordinary times. No one can claim to be immune from the events of the past few weeks wherever they live, whatever they do – we have all to some extent become embroiled in the biggest financial crisis that in my opinion the world has ever faced – certainly in our lifetimes. This time last year we were only just starting to feel the initial rumblings of what has turned in to tectonic shifts in the global economy as the collapse of Northern Rock signalled the start of what has now become a meltdown in the international banking system. We all have to hope that the bold and decisive action taken by the Government in the past few days to inject significant capital into our beleaguered banking system will over time, facilitate an improvement in liquidity, a restoration of banking and consumer confidence and eventually a more healthy housing market. Prior to last September, as an industry we had been steadily increasing our capacity and output as we faced up to the challenge of delivering the three million new homes target the Government had set us. Mrs Beckett’s predecessor Caroline Flint, with whom we had developed a good working relationship, reiterated her commitment to that target just a few weeks ago at the Labour Party conference in Manchester, and as an industry I am sure we would all like nothing more than a return to the days when our main challenge was how fast we could grow our businesses to enable us to try and meet the governments target and our main concerns were the difficulties of dealing with the planning system and worries about the growing cost of regulation. The reality now of course is very very different as companies in our sector across the land – large and small, have been forced by circumstances completely beyond their control to reduce the scale of their businesses as transaction levels have shrunk on the back of the liquidity crisis reducing the availability of mortgage finance by around a half. The human cost of this is staggering in terms of the people who have lost their jobs – many who work directly for homebuilders – many many more who work in supply industries from electricians and plumbers to kitchen and bathroom manufacturers to estate agents and solicitors. The list goes on and on. As ever the impact of a downturn in the housing market is felt throughout the wider economy. The numbers of job losses is very disturbing. Over the past 12 months, our members have had to shed valuable experienced staff and close offices as they have scaled down their businesses in an attempt to adjust to the current climate. Many smaller companies have already failed – before this is over others will surely follow – victims of a set of circumstances simply unimaginable a year or so ago. Somehow however we need to lift ourselves out of the daily diet of gloom and despair and prepare as best we can for the future once the economy settles and more normal mortgage and housing markets return as they surely will. And when they do the need for more homes will not have gone away – indeed it will probably have increased as a consequence of the reduction in output we are currently experiencing. While current circumstances make it very difficult for individual companies to focus on the longer term, this is a key role HBF can and does play on the industry’s behalf. We at HBF have of course not remained immune from the challenging industry environment and, like many of you we had to go through the difficult process of making valued employees redundant. I would like to take this opportunity to thank the great number of you who called me personally over the tough past few months with very welcome support and suggestions. We have managed to retain our core policy team who are involved daily in the discussions with government and other key stakeholders about how we address the current situation, and also the wide range of ongoing policy negotiations. The issues that have dominated our work in recent years – planning and land supply, regulation and development viability, skills, sustainability, and so on – will be just as important when we emerge from the current crisis – possibly even more so. I was pleased to see that as housing minister Mrs Beckett has taken her place on the new National Economic Council that was formed by Gordon Brown last week. You only need to look at what many see as the initial source of the problem- the housing market crash in America - to see the importance of a functioning housing market for a country’s economy. This country needs a properly functioning housing market. It is clear the minister’s input on our industry’s behalf will be critical to the wider Council debate. So what can be done beyond the industry specific measures already announced and the most recent support for the banking system. Well, I think we need to look at this in both the short term and the longer term. And because the economic crisis is so serious, it is clear one off policy decisions will not be enough on their own and a coordinated package of measures is needed. The absolute priority is to resolve the banking crisis so that we can get liquidity back into the mortgage market and allow people to buy the homes that they need. Last week’s announcement by the Government, implemented on Monday of this week is a courageous and daring step and will hopefully, when allied to actions taken in other countries, bring some stability to the financial markets and the banking sector in the near future. But the acid test will be whether the banks start to lend again, to each other and the economy at large, and in that regard I was very pleased the Government are insisting that the banks use this capital injection to help businesses and homebuyers – it is vital that they do. No one is advocating a return to the situation whereby banks are lending too much money to people who cannot afford it. But we need to get back to a situation whereby hard working people can meet their aspirations of owning a home and can access the mortgage markets on sensible affordable terms and conditions. However the measures announced over the past week to resolve the banking crisis will not, on their own, be enough to resolve the mortgage famine. We met with Sir James Crosby last week as he looks to finalise his recommendations on housing finance for the Treasury, and I would urge our new Minister to impresses upon the Chancellor the urgent need to act upon Crosby’s recommendations in his eagerly awaited report. We are also going to need further interest rate cuts. Inflation is not going to be a problem as we slide towards recession. Instead monetary policy will have to support the economy and the housing market. In addition to measures to restore mortgage lending and reduce interest rates we also need to be working with Government on further measures to facilitate housing supply in both the short and medium term. As I said earlier, the need for new homes is not going to go away because of the economic crisis. The consequences of years and years of undersupply will not suddenly disappear. Indeed the undersupply will in the short term probably get worse. Why? Because in recent years in this country we have relied on the private house builders, through the section 106 model, to provide the majority of the social and affordable homes we need - but that model relies on a functioning market whereby volumes are maintained or increasing, and house prices are rising – and as we all know the opposite is happening today. As production levels of homes for sale fall, then so inevitably will production levels of homes intended for the social sector. And so at the very time more people are struggling to buy a home, we risk reducing the supply of affordable and social homes as well. We are going to have to find a new affordable housing delivery model to take us through the downturn. I fully appreciate that there have been a variety of schemes introduced over the past few months aimed at providing such assistance, schemes that we have generally welcomed. But more – much more – needs to be done to find ways to transfer homes built by private house builders in to the social sector. By finding a solution we will both maintain jobs and capacity in the industry, which will be essential for the future and most importantly help provide much needed homes for those who most require them. We also need help to retain our apprentices. If we don’t find ways of keeping them, and indeed attracting new recruits, in the recovery phase we will return to the skills shortage we saw after the last downturn and the resultant drag such a skills constraint placed on our ability to recover and grow our volumes. We welcomed John Denham’s announcement last month of a clearing house mechanism to find ways of keeping apprentices in construction, but more is needed and I would urge our new Minister to work closely with him in this important area. Which brings me on to the longer term. I think we have reached a crossroads for how we deliver housing in this country, and I do not say that lightly. For years, the booming housing market has allowed us to rely on a model whereby ever increasing land values have meant that house builders and land owners have been seen as a cash cow that can be milked to pay for an increasingly long list of wants on the wish lists of central and local government – be it community infrastructure such as schools, roads or sports facilities, affordable housing provision, environmentally friendly homes or lifetime living. But I think that when we emerge from today’s economic downturn – and emerge we will - as the grey hair suggests, I have been around for long enough to realise that like the economy in general, the housing market is cyclical – when we do emerge, I think it will be in to a very different world. And the discussions and debates that are taking place now on Affordable Housing, Community Infrastructure Levy, the definition of Zero Carbon, Lifetime Homes and so on, discussions which it would be very easy to think have less relevance in the current climate, are of paramount importance and the outcome will go a long way to determining whether we have a viable homebuilding industry capable of delivering the volumes of homes this country desperately needs in the future or not. Let me just remind you of the financial numbers – earlier this year we estimated that the cost of the proposed Community Infrastructure Levy, Zero Carbon and Affordable Housing based on conservative estimates provided by respected sources are likely to reach around £3m per hectare – roughly the average value of residential development land outside London in 2007. You don’t have to be a rocket scientist to realise that following the downturn, land values will be far below the levels we saw in 2007 for many years to come. Put simply there just isn’t the scope to expect land to bear such a significant portion of the costs of these items, however worthy they maybe, frankly not even the costs of current policies let alone the large additional costs that will be imposed by future policies I am not for one minute suggesting that our industry and land owners do not have a contribution to make – of course they do – but tough decisions will have to be taken if the Government wants to achieve its social objectives and see significant volume increase once the economy settles. The days when the growing cost of meeting the government’s social objectives could be paid for out of rising land values are gone. Tough choices lie ahead. And if we don’t take account of this now, as we negotiate particularly the parameters of the community infrastructure levy and zero carbon objectives, then when we emerge from this downturn, it will be impossible to deliver the volume of new homes required in the future. We need a sensible definition of zero carbon, and a realistic expectation of what can be delivered cost effectively and without damaging housing output. We also need to decide what part we as house builders can play and what part the energy industry needs to play. As the OFT recognised in its report, Government needs to assist the house building industry especially with new technology as it is threatening to act as a deterrent to development. Local authorities too need to play their part. We cannot have a situation whereby we have authorities each setting their own ever more challenging environmental requirements, or demanding higher and higher percentages of affordable houses. If Government and Local Authorities try to extract too much from sites, then more and more of them will become unviable and less and less homes will get built. And of course we need a planning system that delivers sufficient quantities of land providing for the right homes in the right locations – we have all seen the effect on society of over providing flats in major city centres – we need a system that provides real homes for real people. Local authorities must not be allowed to use the current downturn in house building as an excuse to cut back on future land supply. As you can see there are a great many issues and challenges facing us all and because of this I believe that it is absolutely imperative that we have a strong and united industry voice now more than ever before. I would therefore like to take this opportunity of thanking you for your ongoing support, and also assure you that I and the team at HBF will continue to do absolutely everything we can to represent you as effectively and robustly as we possibly can. I could go on all day discussing the issues but I am conscious of time and I know we have a full programme ahead, and I’m sure you would all like to hear what Doug has to say before we hear from the Minister herself in her first public speech after just a week in office . Thank you
