Montague reforms could speed up housing provision in Brum

A government report designed to tackle Britain’s chronic housing shortage has been welcomed by a Birmingham residential property expert.

Adrian Willet, a director in the development team at CBRE, claims the Montague Report’s proposals to relax the level of affordable housing private developers deliver could encourage much needed investment in the private rented sector (PRS).

The proposals were endorsed by the government today [6 September], when prime minister David Cameron announced the affordable housing rules would be relaxed as part of a package of new measures designed to boost construction and housing.

Mr Willet said: “We are seeing a fundamental shift in residential occupational trends.

“With mortgage finance hard to come by, many of this and the next generation will be long-term renters. The need to provide more homes for rent is therefore vital.”

Although the levels of affordable housing developers have been forced to provide are not normally a problem for sites where housing stock is sold, for private rented housing schemes, the inclusion of affordable housing means schemes can struggle to stack up.

Mr Willet said: “Private rented housing can produce lower residual land values than private sales. If affordable housing is included, developments are often unviable and deals stall.”

Affordable housing policy varies from local authority to local authority and there is often a further variation in policy between rural and urban areas – for example, Birmingham has a policy of 35 per cent on-site provision, whereas  in Bromsgrove it is 40 per cent of units and in Stratford it is 40 per cent of the overall developable floor area, so in many instances, on-site affordable  provision increases to more than 50 per cent.

Mr Willet said: “This confusion has not helped and is one of the reasons why we have not seen developers moving into the private rented sector on any scale outside London.”

Henderson Global Investors has recently secured planning permission to convert its office tower at 1 Hagley Road, Five Ways, Birmingham, into 182 apartments.

As part of the deal, Henderson is required to provide just 13 affordable homes, although contributions towards public park improvements, street enhancement and public transport are on top.

Mr Willet said: “This is a good example of the city council accepting a viability argument. Sir Albert Bore has gone on record to say that Birmingham needs 70,000 new homes in the next 15 years. The deal with Henderson suggests his administration is amenable and ready to make a dent in this target.”

The coalition announcement today also included £10bn of government funding for new homes and more help for first-time buyers through the FirstBuy scheme.

But it’s not all good news. According to Mr Willet, there is still potential confusion surrounding the proposed Community Infrastructure Levy and although the former housing minister, Grant Shapps, welcomed the Report, the proposals sit uncomfortably with the Local Government Association, which believes the boost to rental homes may come at the expense of new affordable housing.

In addition, Mr Willet would like to see tax breaks for developers entering the private rental sector (PRS), and although well-intentioned, the release of so-called “free-land” being offered by public bodies is unlikely to boost the PRS market to any significant degree.

There are also other challenges, including the attraction of PRS to investors.

Mr Willet said: “The perception of PRS as a reliable and recognised asset class has historically been a problem, although I do expect this to change within the next 18 months. I believe we will see three or four schemes in Birmingham in this time – I am aware of a number of companies with active requirements.

“The relaxation of planning is undoubtedly a good start, but I hope we will see further incentives coming from the government and local authorities as they appreciate the mountain this country has to climb in terms of its housing provision.”

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