Isthmus

Thinking

Same Story—
Different Hemisphere.

After a decade in Auckland Tim Watts, Principal Urban Designer at Isthmus, now lives in the UK. As well as continuing to work for Isthmus, Tim also maintains a role with Homes England’s Large Site team. Here he talks about the parallel worlds of housing need in NZ and the UK and reflects on what lessons there may be for New Zealand.

In recent years the United Kingdom and New Zealand have been on different paths politically and economically, however, both are bound by the shared problem of housing supply and affordability. The housing crisis routinely makes the headlines but how does the UK’s response (specifically England’s response) differ to that of NZ?

Statistics

The key statistics from both places tell a story. According to recent research the total housing need backlog in England has reached four million homes while New Zealand’s shortage is estimated at between 130,000 to 150,000 homes. Across the UK houses now cost almost eight times average earnings (12:1 in London) whilst NZ houses cost approximately 6.5 times earnings (9:1 in Auckland).  Home ownership in both countries currently sits at 63% (a 60 year low) and continues to drop.

With such alarming affordability challenges that risk barring many from ever achieving home ownership both governments are leaning into the problem with the UK Government setting a target to build 300,000 additional homes in England per year by the mid-2020s whilst the NZ government notoriously set its sights on building 100,000 affordable homes under the KiwiBuild initiative in 10 years.

Similarities and Differences

Many of the contributing factors to the crisis are common to NZ and England with, for example, pressure points around population growth (natural and immigration), changing household sizes, overseas investment and constrained land availability (be it greenfield or metropolitan urban limits). Similarly, deficiencies have been evident in infrastructure investment, positive planning measures, construction methods, access to capital finance etc.

There are, however, other factors that are particular to each country.  NZ’s housing industry isn’t yet geared to deliver at scale whereas the challenge in England is to look beyond volume house-builders and encourage growth in the number of Small and Medium Size Enterprises. Construction costs and supply chain issues have plagued the NZ house building industry in a way not experienced in England. NZ does not have the mature third sector housing movement enjoyed in the UK.

Part of the response to the crisis in both countries has been to establish national agencies. Homes England, launched in January 2018, is the latest incarnation of a national development agency that has existed for over 20 years (formerly English Partnerships/Housing Corporation and the Homes and Communities Agency).  It describes itself as a mission-based organisation focus on disrupting and driving change in the housing market in England by using its land and finance to attract new entrants and develop new, innovative construction methods. In New Zealand, a number of agencies (HLC, Housing NZ, KiwiBuild) officially came together on the 1 October as Kāinga Ora — Homes and Communities Agency with the aim of being a world class public housing landlord and delivering urban development by accelerating the availability of build-ready land and building a mix of housing of different types, sizes and tenure (public, affordable and market).

Homes England, launched in January 2018, is the latest incarnation of a national development agency that has existed for over 20 years (formerly English Partnerships/Housing Corporation and the Homes and Communities Agency).

The two organisations share a similar strategic intent and have several initiatives in common e.g. almost identical home ownership products — Help to Buy (England) and Home Start (New Zealand), but there are differences. The following examples illustrate the depth and breadth of Home England’s endeavour to get on top of the UK housing crisis by recognising it is a collection of interdependent crises for which there can be no single solution:

Overcoming development finance hurdle — the post 2008 partial nationalisation of the UK banking sector led to a major drop off in house building as access to finance shrank. In stepped Homes England which, having co-opted Banking sector know-how in an investment team, established a £5 billion fund with Barclays Bank and Lloyd’s Bank to offer a flexible source of finance loans to developers, specifically small and medium sized developers.

Ensuring infrastructure readiness — recognising that marginal viability housing schemes and large scale strategic sites often stall due to the lack of enabling infrastructure Homes England established a £5.5 billion Housing Infrastructure Fund. Available to local authorities, it grant funds physical infrastructure such as roads, community facilities and utilities and has enabled many schemes to move forward.

Master developer — Homes England’s land development portfolio is currently heavily weighted to greenfield development (urban extensions and garden towns) on public land including, for example, former airfields in southern England. Until recently, the disposal strategy would be to de-risk sites before taking them to the market with stipulations around affordable housing working to the local council inclusionary zoning provisions (typically between 20-40% affordable housing) however in the case of a few strategic sites such as Northstowe in Cambridgeshire Homes England is starting to take a long-term view as master developer (a role familiar to Kāinga Ora). On these sites it undertakes the masterplanning, secures allocation in the local plan, delivers the infrastructure, leads placemaking and site management activities before releasing land to the market. Homes England is actively seeking sites where it can fulfil this role rather than simply relying on the public sector portfolio.

Realising Modern Methods of Construction — MMC is a term first coined in 2005 to describe a range of offsite manufacturing and onsite techniques that provide alternatives to traditional house building e.g. panellised or volumetric (modular) units produced in a factory and assembled on-site. Take up across the housing industry has however has been slow. Homes England and one of the world’s leading modular house builders, Sekisui House from Japan (they delivered 5% of all Japan’s new homes last year) announced in May this year a joint venture with UK developer Urban Splash to deliver thousands of new homes built in factories rather than on-site. This is being seen as a game changer for MMC that will fast track the mainstreaming of factory manufactured housing.

Community-led — taking a grass roots approach to affordable housing Homes England has been working with individuals and groups in delivering innovative, locally affordable new homes on sites where speculative house builders cannot. The goal is the increase the number of ‘start-up’ community / co-housing housing schemes to levels comparable with that seen in many Europe countries and North America. Grants are made available to support capacity building and predevelopment costs and the capital costs of acquiring land and building schemes.

Growing social housing provision — affordable housing stock in England is split between local council’s and registered providers be they private or charitable trusts (1.6 and 2 million homes respectively). Local councils are, once again, actively building homes but for Homes England, attention has focused on growing the registered provider sector (there are approximately 1500 in England as opposed to the 90 or so registered Community Housing Providers in New Zealand responsible for just 13,000 homes). The Affordable Housing Programme will, in the next 5 years, disburse a total of £4.7 billion in capital grants to registered providers to bring forward housing schemes.

Homes England’s multi-pronged approach to addressing the housing crisis, set out in a five-year strategy that deliberately transcends funding and political cycles, clearly requires significant investment – some £27 billion within the next few year. This is not replicable in a NZ context but as Kāinga Ora matures hopefully it will be able to adopt a similarly responsive approach that recognises the many potential acupuncture points to easing the housing crisis. The breadth and depth of the Homes England approach is paying dividend with broadly a third of all new homes built in England having benefited from its programmes in one shape or another.