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What To Make Of George Osborne’s Get-tough Stance With Councils On Housing Development
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The Chancellor’s “Fixing the foundations” proposal positions housing as necessary for economic growth. The directives are pretty clear on the need to build.
The Localism Act of 2011 and the National Planning Policy Framework (NPPF) it spawned sought to streamline the homebuilding process by granting greater controls and decision making to local planning authorities (LPAs). But to those who make alternative investments in land - toward the goal of building much-needed new homes - it’s clear that about half the councils are slow to establish any residential development programmes whatsoever. So the Chancellor of the Exchequer, George Osborne, has determined that more specific instructions from Whitehall are needed to prompt homebuilding throughout the UK.
Osborne’s proposal, “Fixing the foundations: creating a more prosperous nation,” was issued in July 2015. The broader message is about growing the UK’s economy, but the 90-page blueprint devotes much space to the role that housing plays in the economy: “The UK has been incapable of building enough homes to keep up with growing demand. This harms productivity and restricts labour market flexibility, and it frustrates the ambitions of thousands of people who would like to own their own home.”
As a follow-up to Osborne’s productivity plan, Planning Minister Brandon Lewis gave LPAs until early 2017 to produce their local plans. To counter those that lag behind, the blueprint provides that the following initiatives be taken:
• Take tougher action to ensure that local authorities are using their powers to get local plans in place. The Government will intervene “to arrange for those local plans to be written where necessary.” (Currently, investors working with real asset fund managers de facto devise such plans, which then require LPAs to review and either approve or disapprove of what is proposed.)
• Encourage “proposals for stronger, fairer compulsory purchase powers, and devolution of major new planning powers to Mayors of London and Manchester.”
• Fast track approvals of infrastructure projects that have “elements of housing development.”
• Give automatic approvals on conversion of brownfield land to residential, retail and commercial use.
• No approvals are required to add two storeys to residential buildings, up to the height of an adjoining building, in London and possibly also Manchester. (This plan still allows for neighbours to object and effectively require planning authority review.)
• Extend the Right to Buy to housing association tenants.
• Deliver 200,000 Starter Homes for first time buyers, built on brownfield land or “ensure every reasonably sized housing site includes a proportion of Starter Homes.”
It certainly makes sense that Osborne would prioritise the construction of more homes. As it is, an estimated one million households are unable to buy or rent their own dwellings due to the lag in new home construction in the UK. Investors who favour real assets see a clear opportunity in such strong market demand, which is demonstrated by the continued rise in home prices and rental rates all across the country.
UK Land and real property have historically proven to provide a good return on investment to owners and investors. But even in the face of such overwhelming demand for new homes - 250,000 dwellings should be built every year, however only 118,760 were constructed in the UK in 2014, according to official figures from the Department for Communities and Local Government - such use of capital should be approached with prudence. Speak with an independent financial advisor to weigh the risks and rewards, the alternatives, as well as how property investments balance against other assets.
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