It's all change in Cabinet - But what does that mean for developers?

15th August 2019

Last week we took a look at what the new Prime Minister has previously said about housing, and what we might expect in the coming months.

But, a new Prime Minister means a new cabinet – and that means two other important people in the housing and development world have reshuffled too.

So this week, let’s take a look at the other people with the power to impact how you work.

Secretary of State for Housing, Communities and Local Government – Robert Jenrick

Robert Jenrick

Background:

  • First ran for Parliament in 2010, but wasn’t elected until a by-election in 2014 for Newark
  • Seems to like big-scale projects: he’s in favour of the Heathrow expansion, and his responsibilities have included the Oxford to Cambridge growth arc project – expected to deliver one million homes by 2050
  • Member of the cross-party Committee of Public Accounts which in June 2019 published a report, Planning and the broken housing market
  • The sixth Housing and Communities Secretary in 10 years

Big talking points

  • Championing homeownership for young people

Robert Jenrick is a big believer in homeownership for young people (which is perhaps unsurprising as he’s the first-ever cabinet minister to be born in the 1980s).

He spoke at the Conservative Party Conference in 2018 where he said that doing nothing about the housing crisis means the party "will lose the next election and we'll deserve to lose it".

Opportunities

Writing for the Times in 2017 (note: it’s behind a paywall), Jenrick said:

"Let us be clear that this is a supply-side problem, so the policies must primarily focus on building more good homes."

This is a huge opportunity for housebuilders. There is someone who passionately believes we need new houses, and will take the steps needed to make it happen. 

What shape will that take? Hard to say at this point – but the early signs point to moves in the right direction and, with Boris Johnson as Prime Minister, it’s likely to include deregulation.

So it looks like his approach might be to empower housebuilders to do what they do best.

Threats

One potential concern is that this could lead to poorer quality in housebuilding. If it means a build-’em-cheap, sell-’em-fast mentality, the whole industry could suffer from a reputational hit, even if it’s caused by just a few bad apples.

If it means a build-’em-cheap, sell-’em-fast mentality, the whole industry could suffer from a reputational hit, even if it’s caused by just a few bad apples.

From a design perspective, if some developers invest time, effort and money into more aesthetically-pleasing builds while others sell sites with bog-standard designs for just as much (but with better margins) – we could find that housebuilders are actually incentivised to keep things basic. 

Something as simple as increasing permitted development rights already means local authorities have less control over design, quality, build materials and such, which could affect the perception of the industry.

Another important consideration – where these new homes are built will make all the difference. If people just want to build in and around London because of sky-high sale prices, then it could cause an even greater sense of imbalance with the rest of the country. 

But hopefully, that won’t be too much of a problem under Jenrick (more on that later).

  • Better use of public land

Jenrick has called for better use of public land to make sure that land with planning permission actually gets built on.

He’s also talked about the need to protect green belt land – pointing out that there’s more than enough other land that is easier to use. In fact, not long after starting his new role he visited Kidbrooke Village – a brownfield area in Greenwich. This could show the kind of project he’s likely to support in the future.

Opportunities

The top opportunity is making it easier to get planning permission for brownfield sites in the future – especially in London.

There are many sites just waiting to have something done with them, and large scale investment could offer massive opportunities for developers. From the smaller-scale projects like Kidbrooke Village to complete regional transformations like Silvertown – these projects can be a big boon for often-neglected areas.

Threats

One potential threat – if you’re the kind of developer who likes to buy up land and sit on it while the price climbs, then your time might be up. The kind of rhetoric being used implies that the Government may now have greater expectations, or even demands, that purchased land is actually used to build housing – and sooner rather than later.

Another downside is that this seems to suggest that green belt sites are off the table. Depending on their previous usage, brownfield sites can be more expensive to restore and use for new projects than starting fresh on green sites – and this is a cost that the developer may need to pick up.

  • Extending the Help to Buy equity loan scheme beyond 2023

Jenrick hasn’t specifically said he plans to extend Help to Buy, but while talking about it he has said:

“This is a new administration, a new chancellor, I think all options are on the table. I intend to have further discussions with Sajid Javid in the weeks and months to come”.

As a flagship project around homeownership that has helped more than 190,000 people, it’s probably safe to assume that he’s for keeping it.

Opportunities

This is great news for homebuilders registered with the scheme – it’s a sign that this Government intends to continue it.

There’s nothing confirmed just yet, but you can still start looking – tentatively – for new sites, even if they might complete after the current 2023 deadline. That way you’re ready to hit the ground running when the extension is confirmed.

Threats

If you’re not registered on the Help to Buy equity scheme, or if you convert properties rather than building new houses – this may be bad news. You might have been hoping for the end of the scheme to put your properties on a more level playing field.

For the many who question the validity of the entire scheme, and think that it’s helped to artificially raise property prices even higher, well, it’s not great news either.

  • Fan of the Midlands Engine and Northern Powerhouse

Jenrick is a keen supporter of the government’s Midlands Engine and Northern Powerhouse initiatives – which makes a lot of sense considering he’s an MP for an East Midlands constituency.

Considering how focused on London a lot of policies seem to be, this could be a refreshing change for a lot of developers

Opportunities

If you’re outside of London and the southeast, this is likely to be good news.

And if you’re in the Midlands or the North, this is likely to be great news. 

Taking some of the focus away from the home counties could mean much bigger projects and investment on the horizon.

It could mean easier planning approval too. And it could mean more people wanting to live and work in those areas, resulting in more people looking to buy the properties you work on.

In short, it could mean good things all around.

Threats

If you are London focussed, there might be less coming your way. 

But considering all the other policies designed to help around London, that’s not really likely to impact you too much...


Minister of State (Housing, Communities and Local Government) – Esther McVey

Esther Mcvey

Background:

  • From 2000 to 2006, McVey was a director of her family's Liverpool-based construction business
  • First elected in 2010 for Wirral West, lost her seat in 2015, and then was re-elected in George Osborne’s vacant seat in Tatton
  • Has worked as Minister of State for Employment, Deputy Chief Government Whip and Secretary of State for Work and Pensions

Big talking points:

Esther McVey hasn’t said much at this stage that hasn’t already been covered. But there are a couple of big talking points about the position she occupies worth discussing.

  • She’s the ninth Housing Minister since 2010

As an industry, we’ve not had much luck with Housing Ministers. McVey will be the 9th in nine years, and the 17th in nineteen years.

This article in the Standard quoted people from around the industry hoping for someone to stay in the role long enough to have an impact, including a quote from Countrywide chairman Peter Long:

“I urge the new Prime Minister to create stability by sticking with a housing minister for a decent amount of time. There have been more housing ministers than England football managers in recent years. We need one who will stick around long enough to properly engage with the housing industry.” 

So, is it likely to happen? Well, I’m optimistic, because...

  • She’s the first Housing Minister to attend cabinet meetings

Despite all that frantic turnover in the position previously, McVey will be the first Housing Minister to attend cabinet meetings. 

While she won’t be a full cabinet member, this is at least a sign that the position is being seen as increasingly important. Hopefully, that indicates some moves in the right direction for the industry.


Bonus talking point – The “Right to Own” scheme

In the run-up to the leadership vote, Jeremy Hunt talked about implementing a “Right to Own” scheme to help young people get onto the housing ladder.

The plan was a shakeup in the way public land is sold – instead of selling it to a developer and letting them apply for planning permission, the new strategy would be to get councils and Homes England to apply for planning permission before selling the land.

There’s a huge jump in the value of land once it gets planning permission, this new approach will mean the extra money will go to the government, rather than the developer who buys it.

Then the government can make more money selling less land, and use that extra money to build affordable housing on the land they don’t sell. 

Opportunities

The Right to Buy scheme in the 80s offered opportunity, but the system was often misused – and there’s a risk that the same could happen here.

As always, the devil’s in the details – where will the land be? What kind of land (are we talking green belt or brownfield)?. How will we define ‘young people’?

Broadly, this could be an effective strategy to address the housing crisis. After all, Singapore does a similar thing – and they don’t have a housing crisis.

We know that land with planning permission is more profitable, so it may make sense for the government to embrace that and use that profit to fund big infrastructure projects.

Threats

The big threat? If your business model is to buy land, secure planning permission, then sell the land on for the actual build, this change could be challenging. 

If you take projects from initial land purchase through to final build, it impacts the profitability of the project.

Jeremy Hunt didn’t win, so that probably means the idea is on ice. But as it’s been floated, it’s worth keeping an eye out for.


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So there we have it – a rundown of the talking points that could shape the industry for many years to come. Then again, even a day is a long time in politics, so it could all change again before you know it.

Ideas can last a lot longer than people, so knowing what’s been floated means having a good idea of the kind of things that could happen in the future – even if it’s someone else who carries it out.

Of course, the key to making the most of any opportunity is being able to move fast. That way you’re in the best position to react – whatever happens.

That’s where we can help.

LandInsight is helping developers to move faster whatever life (and politics) throws at them.

Find out more about how we do it.

Oliver is one of our property industry experts here at LandInsight. He loves an adventure – he once bought a 1970s camper van to travel around Australia, bought a sailing boat off eBay and taught himself to sail, and is a fan of swimming in lakes and rivers. His family home is in one of the most notorious crop circle hotspots in the world (though he claims to know nothing about them).