We are meeting today at a time of great opportunity and change for housing policy and the housing industry. Kate Barker's important report to the Chancellor and Deputy Prime Minister in 2004 laid out the challenge of new housing supply - shifting from a low output 'equilibrium' to the greater output necessary to meet housing need. Many MPs came back to Westminster last May reporting that housing was an important issue for their constituents. In December the Government set out a package of reforms from planning to the environment to infrastructure investment to deliver a step change in housing numbers: from around 150,000 per year to 200,000 per year by 2016, as part of a drive to meet the home ownership aspirations of 75 per cent of the population.
Let me start by putting housing in context. As a government, we are committed to economic growth, to social inclusion and social mobility, and to environmental sustainability. Historically, the importance of housing to each of these goals has, I believe, been seriously under-estimated:
If you care about the future of our economy and the chance for more people to share in economic growth, you need to care about removing the barriers to new housebuilding so that the economy can grow.
If you care about social inclusion and social mobility, you need to care about tackling our sink estates; about the segregation of communities divided by income, tenure, and ethnicity; about tacking homelessness and the shortage of social housing.
And if you care about the environment, you need to care about building on brownfield sites, about modern techniques of construction and design, and about building homes that energy efficient.
So housing matters, both in its own right, and as a means of achieving our social, economic and environmental objectives for this country. And over the last nine years there has been significant progress, founded on unprecedented macroeconomic stability - low interest rates and low inflation - and substantial investment in new housing:
Over a million new households have moved into home ownership.
Over one million rented homes have been brought up to the Decent Homes standard.
The number of rough sleepers is down by 75% and the long term use of B&B accommodation for homeless families with children ended.
We have set out three clear goals for housing policy:
First, widening opportunities to home ownership. Nine out of ten people aspire to home ownership. We should be helping people fulfil their aspirations not holding them back.
Second, improving the quantity, quality and choice of rental accommodation. Right to Buy does not mean Wrong to Rent. For those who do not want to own, or cannot afford to do so, flexibility and quality in the rental sectors are absolutely vital.
Third, mixed communities. People aspire to living not just in decent homes but in decent communities. We know that communities with high concentrations of single tenure, low income residents have not worked in the past, and will not work in the future.
I am going to focus today primarily on the first goal - increasing housing supply.
Kate Barker made a compelling case for why we need to ensure housing supply needs to adapt to changing economic and demographic demands. When you look at the statistics, it is difficult to argue against the need for major reform.
There are 30 per cent more households than thirty years ago - up from 16 million to 21 million. A quarter of this growth is due to people living longer, creating four generation families rather than two to three. Around 45% of new households are being created through the growth of single-person households with people marrying later and divorcing more often. From 1971 to 2001 single person households increased from 19% of households to 30% of households.
But new supply has not kept pace with demand. Over the past thirty years, as the number of households has risen by 30 per cent, there has been a 55 per cent fall in new housebuilding. In the four Southern regions in the last five years, 350,000 houses have been built but 500,000 households have formed.
The result of this mismatch between supply and demand has been high inflation. With the exception of Spain, the UK had the highest real price inflation in Europe between 1971 and 2001, with house prices increasing by 3.5 times the rate of inflation. In recent years, house prices have risen particularly sharply, up by an estimated 9% per annum from 1996 to 2002.
The consequences of future inaction are grave. Already, the average deposit for a first time buyer has increased from£5000 in the mid 1990s to£34000 today, and nearly 30% of first time buyers in 2004 relied on gifts or inheritances from family and friends to buy a home.
If we continue along current trends, more families will struggle to get on the housing ladder. Currently 54% of 30-34 year old couples can afford to buy. By 2026 this will have fallen to 35% of 30-34 year old couples if we continue to build at current rates.
Delivering a step change in the supply of new housing is a shared responsibility between central government, local government, and the private sector. But it cannot be achieved by Government and private institutions alone. It needs public support.
In Holland, they have a WIMBY campaign - Welcome into our Back Yard. This is not a drive for tower blocks in every patio. But it is a recognition that new development should be the ally of progress not its enemy. Our challenge is to get beyond the British culture of NIMBYism. We need to take the dialogue and debate over increasing housing supply to the public directly. That means making the case for why increasing housing supply is to the benefit of all; it means engaging and addressing issues of design, infrastructure and environmental sustainability; it means clarifying misunderstandings; it means winning residents' trust.
In our response to Kate Barker's report, we set out a series of steps aimed at doing just that. Let me set out the major areas of reform: planning reforms; funding infrastructure; improving environmental standards; and raising quality. I believe they need to be seen together.
First, in planning, through the new PPS3, on which we are currently consulting, we are proposing to make the planning system more responsive to housing demands and pressures at sub-regional level, and ensure affordability considerations are factored into regional spatial strategies and local development frameworks.
Central Government has also taken a lead. ODPM through English Partnerships is in the process of delivering nearly 100 former hospital sites on to the market. A Task Force on public sector land is taking forward this agenda.
We also accept Kate Barker's view that local authorities should be incentivised to deliver higher housing numbers. As a first step, later this year, we will consult on reforms to the Planning Delivery Grant to ensure that it better supports areas which are delivering high numbers of new homes.
But many of you have said it is about implementation as much as policy:
That is why we are increasing the capacity of the system by increasing the numbers of planners. We have recently introduced a bursary scheme that has supported 280 planners in the last year. We are working closely with the Planning Advisory Service through the use of planning technicians and distance learning courses to re-skill planners in spatial planning. We have also just reached 95% of authorities with good or excellent e-planning services.
We are implementing measures to help local authorities meet targets to speed up the planning system.
The new draft PPS3 also stresses the importance of pre-application discussions which enable communities and developers to discuss proposals before applications.
Second, we have made proposals to ensure new homes come with new infrastructure. As the Chancellor announced in the Pre-Budget Report, there will be a cross-cutting spending review to look at how each department in Whitehall can address the infrastructure needs of new housing developments. But a key part of our reforms, on which we are currently consulting, isthe creation of a Planning Gain Supplement. This involves capturing a portion of the land value uplift arising from the planning process. The proposals for PGS are intended to provide a fair, efficient and transparent levy that recycles the value generated by the planning process back into local priorities and strategic infrastructure. We welcome your views on the PGS. We are aware of past problems in this area, and believe that we have made a serious attempt to address them. Be in no doubt, however, that the principle behind PGS - that a portion of the wealth created by the planning system should be released to support infrastructure that is vital to housing development - is one I and the Government are committed to.
We are committed to putting new housing at the forefront of the drive for environmental sustainability. There is already in circulation the draft Code for Sustainable Homes (covering energy, water, material etc), our baseline for progress and currently out for consultation, the drive towards brownfield development, new steps to increase energy and water efficiency by 40% over the last five years. This is an area in which ODPM is doing intensive work in tandem with DEFRA and we will be making our full contribution to the Government wide Energy Review in the summer.
Finally, as Kate Barker emphasised, quality must not be sacrificed for quantity: high quality design is critical to ensuring communities are economically viable, and winning the trust and support of residents for new development. We are therefore keen to extend good practice:
Through the use of design codes which specify more clearly the quality required, and can not only drive up standards, but speed up the process for approving applications.
Through innovation in the public realm, for example through the Design for Manufacture competition.
Through spreading good practice throughout the delivery chain.
And through the work of CABE and the new Academy for Sustainable Communities.
The Housebuilding Industry
I believe the reforms we have set in place represent a huge opportunity for the industry. They create a new framework in which the housebuilding industry can thrive, and citizens' aspirations can be met.
But if we are to move from away from a NIMBY culture, the challenge for the industry is to ensure that increased quantity goes hand in hand with better quality and efficiency.
The National Audit Office concluded last year that greater use of Modern Methods of Construction could achieve a 400 per cent increase in labour productivity and on-site construction time reduced by over a half. The DPM's competition for a£60,000 house has attracted huge interest and new schemes have been agreed for nine of the sites. This shows what can be done, but takeup of Modern Methods of Construction is weaker than in Europe. So I urge the sector to use the new technologies and opportunities available, to increase productivity.
Meanwhile the CABE Housing Audits from 2004 and 2005 show that the industry can deliver to the highest standards. Windley Tye in Chelmsford was rated as 'very good' and given a score of 83 percent, and Wellington Road, Harlesden, Brent, achieved a score of 88 per cent. But the audits highlight too much poor practice.
Of the 100 schemes audited in London, the South East and East of England in 2004, 17 per cent were assessed as 'good' or 'very good', 61 per cent were assessed as 'average, and 22 per cent were judged to be of poor quality.
Of 93 schemes assessed in 2005 across the North East, North West, and Yorkshire and Humber, just 6 per cent were found to be 'good' or 'very good', 70 per cent were average, and 24 per cent poor.
Importantly and interestingly, many housebuilders were represented in both high scoring and low scoring categories. The only house builders who consistently scored well were Berkeley and Countryside.
I believe the industry has to look seriously at high quality design, at modern methods of construction, not just because it has a responsibility to do so, but out of self-interest. Companies that do not deliver high quality design and more efficient methods of construction consistently across the country undermine their reputation with the public, and they undermine residents' trust both in the specific company and the industry as a whole. We need to see the excellence we often see in the commercial sector, where we excel at just-in-time production, in cost control, in a commitment to innovation and modern methods of construction, applied to the residential sector. That is why you as individual organisations, and the sector as a whole has an opportunity and a responsibility to contribute to the common good.
The challenges are bigger than ever before, but arguably so are the opportunities. We simply have to deliver a step change in the quantity and quality of new homes if we are to meet the economic, social, and environmental goals of this country. The Government has shown it is serious about creating a framework that enables the industry to deliver increased supply. But ultimately, power lies with the people. If together we cannot prove to the public that more housing is crucial to the future of society, and that it can be delivered with the right infrastructure, and to high quality design and environmental standards, we will not win the support of residents. I believe it is a challenge we can and we must win if we are to meet citizens' aspirations for housing over the next decade. We need to do it together and I look forward to doing so.
Speech by David Miliband on 23 February 2006.