Policy change required to aid house building revival
There is a contradiction in the current official assessment of what new house building is needed and what is actually happening. House purchase transactions have risen to pre-crisis levels but house building is still well below what the market might sustain.
Official policies are essentially passive: industry managers believe that a stimulus is merited. There are questions about how to incentivise new building for the private sector (owner occupier and buy-to-let) and increase the amount of new social housing.
The (soon to be in place) Northern Ireland Department for Communities will have responsibility for housing policies and in the recently-approved budget for 2016-17 it says that a key area is "striking a balance between meeting the needs of new and existing housing tenants". This reads as both an implicit emphasis only on rented housing (with no reference to adequate new building for the owner-occupier market) and an indirect comment on the policies to be adopted by the Housing Executive.
There are acknowledged difficult questions to resolve in relation to rent policies for houses within the remit of Government. That relates mainly to Housing Executive properties. However, the low rate of new house building is also worrying. Earlier this century, an annual average of nearly 10,000 new housing units was built in Northern Ireland. Then, in the madness feeding the housing price bubble, in 2005 the numbers increased to a peak of nearly 16,000 for one year. After 2009 the numbers dropped to nearer 6,000 annually. More recently, in 2014-15, under 6,000 new units were started.
Correcting for the statistical anomalies and pricing volatility, house building in 2014-15 was about 35% below what might be in a stable market. New house building is well below the trend of the 1990s.
Officialdom relies heavily on a statistical matrix known as the Housing Growth Indicator which offers a guideline on how the town planners assess overall housing needs for each local authority area and in total for Northern Ireland.
The department offers conservative estimates and these estimates then influence the ambitions of the local authorities.
The recent report of the Housing Supply Forum, chaired by John Armstrong, managing director of the Construction Employers Federation (CEF), was asked to consider why the level of house building had not recovered more rapidly after the recession. The forum report is concerned that an expected update of the Housing Growth Indicator will unhelpfully accept a lower indicative figure than in the past.
The Housing Supply Forum made a series of proposals to get quicker and more flexible decision making by the public sector authorities.
First, and critically, the planning process should adopt a policy of 'presumption in favour of sustainable development' following a similar policy in England.
Other supportive ideas include proposals for more release of more publicly owned land for development, stronger links of developers with housing associations for joint ventures, monitoring of actual time (and delays) being experienced, freedom for local authorities to assemble sites for development and a tracking process to monitor and streamline delivery mechanisms.
Each of these proposals would help to accelerate a house building revival.
Failure to allow or incentivise a stronger recovery in house building risks adding pressure for house prices to rise unduly and, in turn, creates distortions which may affect the economy. In 2015, house prices rose by 7%. The minister, surprisingly, described this as steady progress. In parallel, average house prices are still 4.3 times annual earnings.
Potential home buyers can hardly regard this as encouraging evidence.
Belfast, in particular, needs an ambitious planning policy to allow some older time-expired Victorian housing to give way to positive urban regeneration. Greater Belfast needs to be central to arrangements to more than double the rate of new house building, whether private or social ownership.
Current policies will contribute to rising house prices instead of adding to the real buoyancy of the economy.