Jump-starting housing supply

1. Five minutes of statistics and assertions Jump-starting housing supply Nigel Hugill Executive Chairman, Urban&Civic and Chair, Centre for Cities CIH Harrogate Conference20 June 2011

2. “House repossessions to rise in 2012. CML warns” BBC, June 2011 Mortgage arrears No. of repossessions on mortgaged properties (000s) Mortgage arrears (% of mortgage loans outstanding) Repossessions CML estimates for 2011/2012 (my money is on both being a little lower) Lending to UK consumers secured against their homes and financing our Housing Associations is amongst the safest banking business in the world Source: Council for Mortgage Lenders

3. Flat national house price statistics obscure genuinely fundamental underlying trends Trends in owner occupation in England – 1996 to 2009 A decade like never before: low interest rates have impacted more inexpediting repayments than in staving off repossessions Source: Survey of English Housing

4. Homeowners less indebted but also appreciably older under 44 45 to 64 over 65 UK homeowners: 29.1% 30.7% 40.2% 2009 27.5% 32.5% 40.0% 2008 26.9% 33.0% 40.1% 2007 26.7% 33.5% 39.8% 2006 26.1% 35.0% 38.8% 2005 26.1% 35.2% 38.7% 2004 25.6% 36.1% 38.4% 2003 25.0% 37.2% 37.8% 2002 24.0% 38.5% 37.5% 2001 24.4% 38.3% 2000 37.3% 0% 20% 40% 60% 80% 100% Owner occupation (and housing wealth) is increasingly concentrated into the hands of the over 45’s (and they all have votes) Source: Deputy for Communities and Local Government

5. Centre for Cities identifies two more divisions Net private sector job creation 1998 to 2008 1 job Warwick Cambridge 10 jobs Bristol London Southampton Over an apparently expansive decade, 10private sector jobs were created in a southern pentagon for every 1in the rest of England Source: Nomis 2010, Centre for Cities

6. Sharply differentiated regional house price dynamics under Ken Clark and Gordon Brown 1994 to 2002 – regional dividesouth outperforms north 2002 to 2008 – the gap narrows as outperforms reverses North South East (excluding London) South East (excluding London) North Unequivocal signs that the cycle has reversed once more, both in terms of prices and housing transactions Source: Halifax HPI, Q1 1994 = 100 and Q1 2002 = 100

7. Not a fair world: access to capital accentuates investment performance Percentage of year-on-year change as proportion of house purchases Housing advantage has accrued disproportionately to 45+ year olds in the south of the country with better access to capital Source: Hometrack

8. Kate Barker’s aspiration to build into affordability has absolutely not taken place Rolling 12 month UK housing statistics 200,000 PrivateAffordable Private 180,000 Private 160,000 140,000 120,000 100,000 80,000 Affordable 60,000 40,000 Affordable 20,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 New houses are not getting cheaper: they are just not getting built Source: Hometrack

9. To prompt debate . . . • HA management expertise, rather than access to capital, may carry greater competitive advantage in current cycle. Sector to own less and manage more. • Estimated £5bn of first time buyer deposits in both 2009 and 2010 benefited from Royal Bank of Parents. Similarly, private landlords invested £15bn (equity and debt) in 2010 buy to let investment. • Figures dwarf institutional investment (say, £4bn of pipeline PRSI). Maybe we have been looking in the wrong place (JC Flowers). • Regional dynamics limit private sector capacity to provide affordable contribution. Clear conflict with new localism; southern pentagon residents unlikely to prioritise social housing. • Large scale institutional investment in affordable more likely to come from ownership, unless HA’s elect for new index linked funding.