Solving

the Housing Conundrum

A 3-STEP APPROACHTO NORTH EASTHOUSING POLICY

Contents

Foreword 5

Executive Summary 6

Introduction 8

Housebuilding Survey 10

Finance 13

Planning 16

Existing Stock 18

Conclusion 22

Summary of Recommendations 23

Acknowledgements 27

References 27

Solving the Housing Conundrum

4

NECC is the North East’s leading business membership

organisation and the only regional Chamber of

Commerce in the country. We represent around 4,000

businesses located in Northumberland, Tyne and Wear,

Durham and Tees Valley, covering both local enterprise

partnership areas in the North East. Our members are

drawn from businesses of all sizes and sectors, and

employ around 30% of the region’s workforce.

Watson Burton is a Newcastle head-quartered leading

national law firm with a well-earned reputation for helping

businesses succeed. Offering a range of commercial

law services, the firm has significant nationwide

coverage providing first class legal advice from offices in

Newcastle, Leeds and London.

The firm has six core practice areas in employment, real

estate, construction, insurance, commercial litigation

and corporate and commercial. Key to the firm’s success

is the ability of its expert lawyers to get to know clients

and understand the commercial realities of running a

business.

FOREWORDWELCOME TO THE NECC AND WATSON BURTON HOUSING REPORT. We first started discussing the need for

a detailed examination of North East

housebuilding activity following our ‘Help to

Buy: Boom or Bubble’ report last year. Since

then our teams have carried out a survey of

NECC members, held one-to-one interviews

and chaired numerous task groups with the

vital support of those involved in the supply

chain.

The result is a cohesive and balanced set of

recommendations which addresses a range

of viewpoints; from opening up funding

opportunities, to creating a more supportive

planning regime on a national and regional

level. It is also very clear that as a region, we

need to be focusing on utilising existing (and

sometimes dormant) housing stock.

Change will require buy-in and commitment

from regional organisations, national

organisations and central government, and this

report will allow NECC to campaign extensively

for this region in this respect, taking the

message out to key decision-makers – who in

turn must engage to make these changes.

The team at Watson Burton has provided

input based on our extensive knowledge of the

housing market across a range of perspectives

including finance, planning, construction

and the integration of renewable energy into

housing development.

Our involvement has enabled us to see first-

hand the commitment from NECC and its

members to address these key issues and

develop a robust plan which will help the region

to realise its full potential in delivering a long-

term and sustainable housing strategy.

Pursuing the recommendations in this

report will enable the North East to seize this

opportunity to influence change with the

broader aim of creating stronger sustainable

communities and infrastructure for the future.

Tracy Hall, Partner & Head of Real Estate,

Watson Burton LLP

5

Housing is an engine of economic growth. Every house built in the North East equates to an additional contribution of £80,532 to the regional economy and the creation of 1.9 jobs. This represents a £1.3bn contribution to the region’s economic output.

At first glance, this can appear to be an

impressive set of figures. However, when

we consider that the North East’s housing

market has under-performed for the past

decade and last year built only half of the

number of homes needed, it becomes

a matter of how much economic output

are we failing to capitalise on and why?

This report sets out a number of

recommendations to industry and

decision-makers which we believe would

support the North East to capitalise on its

potential to be a prime development site

and deliver more homes.

These recommendations must be

underpinned by strong leadership that

presents a clear, proactive and pro-

development stance on behalf of the

North East. Whether this comes from

local authorities, combined authorities

or local enterprise partnerships is not

important; what is essential is that a single

body takes responsibility for driving this

policy agenda and is willing to be held

accountable for doing so.

We outline priorities in three key areas:

FINANCE Constrained public finances, cautious

private sector lenders and investors, and

limited availability of mortgage finance

make securing finance for development a

significant obstacle.

With the continued squeeze on the public

purse and a notable move away from

supply-side spending, Government must

think carefully about its role in increasing

housing supply and how public finances

are best used.

Access to private finance is an acute

issue, particularly for small and medium-

sized developers. Likewise, attracting

investment into the region is difficult, with

returns on capital typically lower than in

most other regions.

The North East must showcase why

it is an attractive option to developers

looking to build new homes. Returns on

capital investment alone do not have to

be decisive. Innovative public and private

financing options; mortgage availability;

and financial incentives tailored to the

region’s housing market will go a long way

to attract investment.

6

ExecutiveSummary

PLANNING The North East needs a swift planning

process that gives the region a

competitive advantage for investment.

Our capacity for housing development

should be a key advantage over

competitor regions even though returns

are potentially greater elsewhere.

We must foster a pro-development

planning system that gives developers

and investors confidence from the outset

that all stakeholders will actively work

towards the common aim of delivering

more houses.

The willingness of local politicians

to support housing development is

often reflective of the attitudes of the

constituency they represent. Therefore,

the electoral cycle is a key factor in

generating support for housing at the

local level.

Making spatial strategies accessible to

local people, not just planning experts;

promoting the scale of housing need

in the North East; and getting local

people involved from the outset can

help encourage the public to face up to

the choices needed and build support

for development.

EXISTING STOCK Addressing the housing crisis is not simply

a matter of building more homes – we

must make the most of our existing stock.

The North East is host to one out of every

five properties vacant in the UK. These

houses are empty or unfit for purpose for

a variety of reasons and policy responses

should recognise this; some properties

can be cost-effectively brought back into

use, while for others the best option is

demolition and redevelopment.

It is essential that there is an avoidance

of a one-size-fits-all approach to

empty homes. A combination of

refurbishment, demolition and adapting

existing stock to meet new needs and

market opportunities, such as an ageing

population should be adopted, along with

financial incentives which recognise the

resource-intensive process of bringing

our existing stock up to standard.

7

The United Kingdom is in the grips of the biggest housing crisis in a generation. Years of under-supply, escalating demand and a lack of access to the homes people want and need have created a vicious cycle. Without drastic and quick action this cycle will not be broken and the crisis further entrenched.

The housing crisis is a prominent issue on

the political agenda and has been subject to

intense political and public debate. However, it

is crucial now that words are turned into action.

This year has seen the publication of the

Labour-commissioned Lyons Housing Review

and IPPR North’s Home Economics: the role of

housing in rebalancing the economy – these are

just two examples of a proliferation of reports

seeking to remedy the crisis, deliver more

homes and reap the enormous economic

benefits of doing so. Government must look to

harness this range of expertise and formulate a

long-term and cross-party delivery plan.

With a specific focus on the North East,

this report presents the barriers to, and

opportunities offered by a sustainable and

thriving housing market, and seeks to unlock

the contribution housing can make to the

regional economy. We set out a number of

recommendations to industry and decision-

makers which we believe would support the

region to capitalise on its potential to be a

prime development area and deliver more

homes.

The UK should be building at least 243,000

homes a year to keep pace with demand; in

2013 only 109,000 homes were completed,

a figure typical of more than a decade of

under-supply.1 The consequences are

widely recognised: rents and mortgages are

outstripping earnings; housing waiting lists

continue to grow; and regions do not have

the houses they need to attract business

and workers.

Housing is an engine of economic growth.

Every house built in the North East equates to

an additional £80,532 in the regional economy

and the creation of 1.9 jobs, which represents

a £1.3bn contribution to the region’s economic

output.2

Our housing offer is intrinsically linked to the

North East’s ability to attract and retain a

skilled workforce, as well as strengthening local

communities. Housing supports the delivery of

new infrastructure, improves services such as

public transport, boosts the funding available

for local schools and supports a strong

consumer market.

It is a nationwide priority to deliver more

homes, and with the North East’s distinctive

and unique development potential as

highlighted in this report, it is critical our

region plays a leading role in addressing the

housing crisis and capitalises on the significant

economic benefits of doing so.

The North East should be a prime location for

development. With an abundance of potential

development land, fantastic quality of life and

lower population densities to list but a few, the

foundations for a strong housing market are

here.

Already the region’s housing market is showing

strong signs of growth and improvement.

Introduction

8

New house registrations for Q3 2014 were up

32% on the same period from the previous

year – the highest year-on-year increase in

England and significantly stronger than the 8%

UK average increase.3 It is essential that this

positive momentum is sustained and built upon.

Despite clear signs of progress, the North East

housing market has under-performed for the

past decade – demand continues to outstrip

supply; house prices are six times the average

income; and a housing shortfall of 75,000 by

2031 is expected if we continue to build at the

current rate.4

In a region where there is significant demand for

greater housebuilding along with the potential

to deliver it, why does the North East’s housing

market fail to build on it, and how can this be

rectified? This report sets out our answers to

these questions..

SCOPE OF THE REPORTThrough the work of a Task Group of

NECC members bringing together a range

of passionate individuals with invaluable

insights and knowledge on the strengths and

weaknesses of our housing market; a survey

of North East businesses and organisations

working in the housebuilding sector; and in-

depth research interviews, we have sought to:

• Build the case for greater levels of housing

development in the North East;

• Demonstrate how this links to wider

economic and business benefits; and

• Influence policy decisions in favour of

greater housebuilding.

Failure to deliver the number of homes we need

is not a new phenomenon. For the past decade

we have had a nationwide undersupply of new

housing. Political parties of all persuasions have

recognised this, yet when it comes to how they

would deliver more homes, there is a marked

divergence in opinion and approaches.

One thing is perfectly clear: national housing

policies will not be the panacea to the housing

crisis.

Understanding housing need and the barriers

to delivering more homes are dependent on

the region in question. Housing policy must be

attuned to these differences and be formulated

with the active involvement of local and regional

stakeholders who understand the market and

how to deliver more housing, both private and

social, across a range of tenures.

The North East’s ability to deliver the homes

we need is dependent on a myriad of factors

that play out at multiple levels, with the

interaction of central and local policy, market

considerations and support for development all

interdependent. Only by understanding these

factors and how they interact can we really

generate the policy and market conditions

most conducive to a sustainable and healthy

housing sector.

To this end, we need a delivery plan that fosters

a pro-development and effective planning

system; a reformed and original approach to

finance; and innovative and appropriate use of

our existing housing stock.

Housing is a fundamental part of our region’s

economy and future growth. A strong and

respected organisation must champion a

shared vision for the North East economy with

housing at its heart, working to deliver this

vision in the face of challenges and opposition.

9

Through a comprehensive survey of North East businesses and organisations actively involved in the region’s housing sector and employing 40,000 staff across a range of disciplines including construction, refurbishment, planning, real estate and housing provision, we gained a detailed picture of: • How the North East’s housing market is

performing;

• The importance of the sector to the regional

economy; and

• Barriers to development.

When asked to indicate how the North East’s

housing market is performing relative to the rest

of the UK, 55% of respondents believe it to be

either under-performing or seriously under-

performing, with only 4% indicating the market

to be performing strongly overall.

When we break down the market into its social

and private sector components the results are

similar, with 43% and 42% respectively believing

the markets are under-performing or seriously

under-performing.

Under-supply of housing is the key indicator that

a region’s housing market is not performing. In

2012/3 the North East recorded 4,090 housing

completions, approximately half the number

needed to satisfy demand, and significantly

below the regional average of 11,800

completions.

When we surveyed why the region’s completion

rate is significantly lower than what is required, a

number of key themes emerged. These include:

• Securing finance is a significant challenge, particularly for small and medium sized

developers who are unable to access funds

that are suitable and affordable. Investors and

lenders are incredibly cautious and with lower

returns on investment in the North East, they

often choose to invest elsewhere or lend

exclusively to the big six developers where

there is less risk.

• Public funding is largely unfit for purpose

in the North East. Grant rates are too low,

smaller developers often lack the back office

infrastructure to navigate complex funding

pots, and financial incentives do not align well

with North East housing priorities, such as

empty homes and homes to suit an ageing

population.

• Housing policy does not work well nationally due to big differences between the

regions.

• The planning system is difficult to get through, with a lack of up-to-date Local

Plans, under-staffed planning departments

and limited land release being some of the

mostly commonly cited issues.

• Existing housing stock is underutilised and unfit for purpose. High vacancy

rates, dilapidated properties and houses

unresponsive to changing housing

needs, such as demographic change, is

a disproportionately greater issue in the

North East.

HousebuildingSurvey

10

TO WHAT EXTENT DO THE FOLLOWING FACTORS PRESENT A BARRIER TO DEVELOPMENT IN THE NORTH EAST?

100%

75%

50%

25%

0%PUBLIC

OPPOSITIONSECURING

BUILD FINANCEDIFFICULTY SECURING

INFRASTRUCTURE TO SUPPORT

DEVELOPMENT

OBTAINING PLANNING

PERMISSION

LAND AVAILABILITY

DELAY TO DEVELOPMENT

ONCE PLANNING PERMISSION HAS BEEN GRANTED

SECURING MORTGAGE

FINANCE

Significant Barrier Somewhat of a Barrier Not a Barrier

• Public opposition to development is

typified by a vocal minority painting housing

development as a bad thing that should

be challenged. Contradictions in national

planning policy, such as Neighbourhood

Plans becoming the tools of wealthy

and well-organised communities to

block development plans can trump land

allocations and Local Plan considerations.

• Strategic and joined-up thinking is missing. Local authorities and departments

are not coordinating where they should be.

Transport, employment sites and satisfying a

five year housing land supply are just some of

the areas where local authorities should be

working together and thinking strategically to

deliver common goals.

• A lack of leadership in the North East means that the region does not have a respected and visible flag bearer to champion development in the region.

Investors looking to the region can be

uncertain of whom they should be speaking

to, for instance the existence of multiple

bodies and organisations can cause

confusion. The presence of a visible leader

with the support of the region behind them

would allow the North East to present a

shared vision for the region and to speak with

one voice.

A thriving and sustainable housing market

is not simply about the number of homes

provided, but also the degree to which they

meet the needs and wants of customers.

In the North East we have many unique and

distinctive features that we should utilise to

strengthen our housing offer.

We have excellent quality of life, cutting

edge energy efficiency technologies and the

ability to deliver good value for money with

our housing. With the exception of energy

efficiency and natural light, for which 54% and

47% of respondents respectively indicate

homes in the region meet customer needs,

respondents suggest the region’s housing is

failing to capitalise on its potential.

Housing developments are regarded as failing

to deliver for the customer when it comes to

adequate space within homes, accessibility,

and house size and build quality.

Our survey clearly demonstrates that housing

is pivotal to the North East economy in

many ways. It supports talent attraction and

retention, local communities and leisure

services, boosts the local supply-chain and

creates employment opportunities.

If we are to capitalise on these opportunities,

we must remove the barriers to development

and deliver more of the sort of homes the

region wants and needs.

TO WHAT EXTENT DO YOU AGREE OR DISAGREE THAT THE BUILDING OF NEW HOMES IN THE NORTH EAST IS IMPORTANT FOR THE FOLLOWING?

100.00%

TALENT ATTRACTION

TALENT RETENTION

SUPPORTING LOCAL

COMMUNITY SERVICES

SUPPORTING LOCAL RETAIL &

LEISURE SERVICES

SUPPORTING SUPPLY CHAIN

COMPANIES

EMPLOYMENT OPPORTUNITIES

Disagree Neither Agree or DisagreeStrongly Disagree

75.00%

50.00%

25.00%

0.00%

Agree Strongly agree

INFRASTRUCTURE PROVISION

HousebuildingSurvey

12

Finance

CONSTRAINED PUBLIC FINANCES, CAUTIOUS PRIVATE SECTOR LENDERS AND INVESTORS, AND LIMITED AVAILABILITY OF MORTGAGE FINANCE MAKE SECURING FINANCE FOR DEVELOPMENTS A SIGNIFICANT OBSTACLE.

SECURING FINANCECapital funding for new homes from Government

has undergone a significant reduction, with the

drop in grant funding and emphasis on recoverable

investments typifying a pattern of a government shift

away from supply-side spending. With the continued

squeeze on public finances, Government must think

carefully about its role in increasing housing supply.

In the North East, where rents and returns on

investment are typically lower, grant rates are too low

and recoverable investments unviable. Essentially,

public funding for development in our region is largely

unfit for purpose. Indeed, new house registrations in

the North East by the social housing sector decreased

by 8% in Q3 2014 when compared with the same

period a year earlier.5

Difficulties securing public finance are made worse

by the complexity of funding arrangements. The

proliferation of funding pots; onerous application

processes and lending terms; and the inapplicability

of lending available to the region’s needs, are all areas

where we must see improvements if we are to supply

more homes.

Difficulties securing finance are not unique to the

public sector. Private sector lenders remain incredibly

cautious about financing developers following the

recession, particularly when the returns on capital are

lower.

Access to finance is an acute issue, especially for

small and medium-sized developers who have every

potential development sense-checked by lenders,

often only to find they were unable to secure the funds.

Developers need to be able to access low-cost and

appropriate finance, working in partnership with lenders

to secure the best finance option available, considering

both traditional and alternative financing models.

RECOMMENDATIONS Public funding

• A review of current public funding arrangements

should be conducted to identify finance gaps and

barriers to securing funding reflective of the North

East’s housing market.

• Existing funding pots should be rationalised and the

application process and lending terms proportionate

to the level of risk.

• Government must recognise that recoverable

investments are not a viable funding option for many

areas in the North East. A review of grant rates;

increased supply-side spending; and greater support

for risk-sharing arrangements for public and private

sector partners should be government priorities.

Private lending

• The region must showcase why it is an attractive

option to potential investors and developers. Returns

on capital investments alone do not have to be

decisive – an effective planning system; a skilled and

readily available workforce; and a strong local supply-

chain will go a long way to attracting investment.

Developing the region’s offer in these areas is

essential.

• Banks, private equity houses and other funders

should work more closely with developers, building

strong and resilient relationships in which all parties

understand business plans, growth ambitions and

the particulars of the development in question.

• Lenders and customers should work together to

identify the best funding options available, with

greater consideration of alternative sources of

funding. A forum to facilitate discussions between

developers and finance should be established.

13

THE NORTH EAST HOUSING MARKET

Help to Buy has undoubtedly had a positive impact in the North East. Demand is up and correspondingly so is supply; homebuyers are more confident in their ability to secure a mortgage; and house builders have the confidence to build..

In the North East 3,562 new homeowners have

been created since the launch of Help to Buy

and strong demand for housing generated by

the scheme means there is a strong pipeline of

development.6 This is expected to feed through

into higher levels of new house registrations in

2015.

Unlike in the South East, Help to Buy has not

caused significant price pressures and we are

not presenting signs of a housing bubble or

over-heating in the market. 78% of our survey

respondents believe a housing bubble in the

region is unlikely. Therefore, Bank of England or

government efforts to calm fears of a bubble in

the South East should not create unintended

consequences in our region.

Governments often demonstrate a tendency to

introduce national policies to address concerns

specific to a certain region or group of regions.

The bedroom tax is a London-centric policy

response to over-crowding – an issue not

manifest in the North East. This has had the

perverse consequence of making it more difficult

for housing associations to borrow, leverage funds,

and essentially build homes due to a significant

loss of revenue from the build-up of rent arrears.

Equally, the Community Infrastructure Levy

(CIL) was introduced following the peak of the

recession. Given the role of development in driving

the economic recovery forward and its potential to

make developments financially unviable, the policy

is problematic.

This is a trend that cannot be repeated with Help

to Buy. London is a unique market and policy

should reflect this, while allowing the North East to

continue to reap the benefits of this scheme.

DARLINGTON BUILDING SOCIETY – MORTGAGESDarlington Building Society is the country’s

22nd largest building society out of 44 with

assets in excess of £530m. It is a leading local

building society based in the North East of

England and the only building society with its

head office based in County Durham, the Tees

Valley and North Yorkshire.

Although Darlington Building Society provides

mortgage finance to borrowers throughout

England and Wales most of its lending

takes place in the North East of England.

Consequently it needs to understand the local

housing market and tailor mortgage products

to local demand. As house prices in the region

are generally lower than in other regions in

the UK, particularly in the South, the Society

is happy to process small mortgages and for

many borrowers will consider applications up

to 95% of the property value.

Each mortgage application is individually

underwritten by qualified staff and the Society,

unlike many other mortgage lenders, does not

use automated credit scoring systems, thereby

avoiding a ‘computer says no’ approach to

mortgage lending. The Society believes that a

personal approach is still the best even in these

days of rapid technological advancement

and this approach is certainly appreciated by

the Society’s growing number of borrowers.

As more competitors are automating their

systems and closing branches, Darlington

Building Society is attracting more customers

who still prefer to deal with a real person.

14

RECOMMENDATIONS • Help to Buy should continue with adequate

funds allocated to the scheme. Any

attempts to prevent a bubble in the South

East must avoid unintended consequences

for the North East.

• Any assessment of the national housing

market for judging national policy should

exclude London – it is a unique market within

the UK that distorts the national picture.

• Mortgage lenders should work to demystify

the application process to help people

understand what they need to do to obtain a

mortgage.

• Local authorities should be given the time

necessary to introduce appropriate CIL

Charging Schedules; otherwise Government

risks the introduction of inappropriate

strategies that may hinder development

simply because local authorities were in a

rush to satisfy an arbitrary implementation

deadline.

15

Planning

PLANNING POLICY The North East would benefit massively from

a swift planning process that gives the region a

competitive advantage for investment. Our capacity

for development should be a key advantage over

competitor regions even where returns are potentially

greater elsewhere. This is not the case, with almost

nine in 10 businesses surveyed regarding the planning

system as a barrier to housebuilding.

The tightening of the public purse strings in recent

years has seen a worrying tendency to target planning

departments disproportionately for budget cuts, with

2014/5 budget figures projected to show a 13% drop

in planning and 12% drop in housing budgets – the

biggest departmental reductions.7

Inevitably, planning departments across the region

are experiencing severe capacity constraints, with

many lacking the experienced and highly-skilled staff

and resources necessary to process applications,

particularly when there are specialist planning skills

required. Planning departments cannot afford to be

targeted in future budget cuts.

With such capacity constraints it is critical that Local

Planning Authorities (LPAs) find the best ways of

working with developers to deliver housing, and that

they are supported in doing so.

Generally, North East LPAs are keen to see

developments push ahead. Unfortunately, many

politicians can be perceived as not exhibiting the same

pro-development characteristics.

Housing development is often perceived as a powerful

determinant of how a constituent votes, therefore the

electoral cycle is a key influence on the willingness of a

politician to support development. This is most evident

with regard to the release of the greenbelt.

Brownfield sites in the region only have the capacity to

deliver 38% of the homes needed; meaning at least

62% will need to be delivered on greenfield sites.8

When we consider the viability of brownfield sites, such

as whether they are contaminated, located in places

people want to live and close to employment zones, it

is evident that brownfield sites alone cannot provide

the homes we need – there must be a sensible and

evidence-based approach to greenfield and greenbelt

release, and this must be reflected in planning policy

and guidance.

RECOMMENDATIONS • Coordination between all stakeholders in the

planning process should occur from the outset.

Establishing positive working relationships to allow

any potential barriers to be identified and resolved at

the earliest opportunity.

• Contradictions in national planning policy and rhetoric

should be resolved. Updated guidance should

stipulate that development plans and proposals

must work to common housing ambitions. This

should include stronger guidance on neighbourhood

plans to ensure they are used positively and given

appropriate weight in the planning process.

• We must see the delivery of up-to-date Local Plans,

with a very positive emphasis on delivering the full

amount of housing and employment sites needed;

and identification of areas where there is a strong

case for collaboration with other authorities.

• Local authorities should identify sites suitable for

self-build, thereby supporting the delivery of small

scale developments.

• Greenbelt policy should be reviewed and decisions

around its use depoliticised. Any decisions to block its

release should be robust and evidence-based.

• Strengthened public support to make brownfield

sites viable is required, with funding identified

specifically for this purpose.

ENGAGING THE LOCAL COMMUNITY The economic case for housing is widely understood,

with every £1 spent on housing having the potential to

generate £1.84 in the local economy.9 However, such

figures often fail to resonate with local communities,

and when new homes are perceived as taking away

green space, placing pressure on local services and

16

generally detracting from the local area, the barriers to

getting developments off the ground are immense.

It is crucial that we do more to dispel the myths and

negative connotations aroused by housebuilding. The

default assumption propagated by a small but vocal

group of the local community that more development

is a bad thing must be challenged.

There is no shame in supporting development.

Indeed, it is a rational approach to strengthening

local communities. Housing supports the delivery of

new infrastructure, stronger services such as public

transport, ensures greater funding is available for local

schools, and enables investment in local shops and

businesses.

New and innovative ways of engaging the local

community are needed, particularly the ‘silent majority’

of disengaged community members who are happy for,

or indifferent to a development going ahead.

The localism agenda is essential to getting sites to

planning without meeting significant local opposition.

Thus, having up-to-date development plans that have

gone through the consultation process locally is a key

element that needs to be addressed in pushing forward

more housing sites in the North East.

Making spatial strategies accessible to local people,

not just planning experts; showing the scale of housing

need in the North East; and getting local people

involved from the outset can help encourage the public

to face up to the choices needed and build support for

development.

RECOMMENDATIONS • Critical spatial planning documents such as local

plans should be presented in a way which is accessible

to everyone, not just planning experts and provide

the basis for strengthened engagement with the

local community.

• Preconceptions that development is a bad

thing should be challenged, along with common

development myths. The ‘silent majority’ should be

targeted using new forms of engagement, such as

social media and targeted marketing.

• Planning should better identify types of housing

need, for instance more bungalows for an ageing

population, thereby making it more difficult to

oppose developments.

• Housing should generate the greatest economic

benefit for the local and regional economy.

Where possible, local apprentices should be

used to boost skills and foster a sustainable

workforce moving forward. Public bodies have a

responsibility to utilise the local supply-chain and

encourage local procurement where they are

financing development.

17

PELTON FELL, CHESTER-LE-STREET Both Isos and their development partner Durham

Aged Mineworkers Home Association are working

in partnership with Bellway Homes and Chester-le-

Street Council to deliver a major regeneration project

in Pelton Fell.

The development comprises of 249 new homes of

which 91 are affordable – a mix of rented and New Build

HomeBuy. The attractive new homes are being built

over several phases.

Community involvement, participation and decision-

making are essential to all regeneration projects.

To aid the successful delivery of the development,

Isos was instrumental in the creation of the Pelton

Fell Neighbourhood Regeneration Partnership and

continues to play an active role in its successor

organisation, Pelton Fell Community Partnership.

The project has incorporated the recruitment and

training of local 16-18 year olds to become trades

people, as well as the development of the community

through a number of community activities.

The Isos Neighbourhood Investment Manager

supported Pelton Fell Community Partnership to

successfully raise over £1.4m to give Pelton Fell’s

Village Hall a major refurbishment.

ExistingStock

While greater levels of housing development are clearly needed in the North East, it is also essential that the best use is made of the housing stock that already exists. This requires making sure that empty homes are brought back into use wherever possible, and that more is done to make sure that the good quality family homes badly needed are used to full effect.

EMPTY HOMES Currently, it is estimated that there are

914,000 empty homes across the UK10;

216,050 of these properties are in the North

East, meaning one out of every five vacant

properties in the UK is located in our region.11

Addressing the housing crisis is not simply

a matter of building more homes – we must

make the most of our existing stock.

Some level of housing vacancy is a natural

part of the market and can be explained by

short-term vacancy for refurbishment, being

between lets or as second-homes.

However, the North East has a relatively higher

incidence of long-term vacancy that cannot

be explained as natural market turnover, but

is symptomatic of a region failing to make the

best use of its existing stock.

Some areas have experienced dramatic

periods of social and economic change, for

instance pit villages built solely to capitalise on

the mining industry; others are simply in a state

of disrepair and dilapidation without the funds

or demand for refurbishment.

Once properties are long-term vacant it is

difficult to stem the issue, with pockets of

decline and deprivation typified by higher levels

of unemployment, lower average earnings and

higher housing benefit bills. Those who can

leave do so and the spiral of decline worsens.

Essentially, the topic of empty homes is a

pressing socioeconomic issue.

Poor demand for housing in these areas;

comparable methods of valuation which bring

down the profit potential of new development

in the area; and the negative perceptions often

aroused by areas demonstrating high levels of

disrepair make development and investment

incredibly unlikely.

There is no universal solution to the empty

homes issue. Homes are empty for a variety

of reasons and responses and solutions

should recognise this. Some properties can be

cost-effectively brought back into use, while

for others the best option is demolition and

redevelopment.

RECOMMENDATIONS• The powers of local authorities to address

empty homes should be strengthened, with

greater ability to leverage funds; work with

private sector partners; and pilot projects

to address empty homes and boost the

local area.

• The perception of areas of empty homes

as problem places to be avoided must be

addressed and instead work to demonstrate

the development potential latent in these

areas. For instance, renovation projects using

local apprentices or community awareness

schemes can boost the local community

and breakdown unhelpful stereotypes and

perceptions.

18

• Financial incentives and public funding to address

empty homes, including funding to speed up the

demolition process, should be increased to reflect

the expense and resource-intensive nature of this

process; otherwise few housing associations will

have the wherewithal to act.

• As part of the Local Plan process, local authorities

should identify instances of empty homes and

appropriate responses. For homes that can be

feasibly brought to a decent homes standard,

the local supply-chain should complete this work

wherever possible. For houses where there is no

economic case for refurbishment, they should

be demolished to free up scalable sites for

development.

CLEADON PARK Cleadon Park sits within South Tyneside. It was an

estate of approximately 950 council houses with large

gardens, built in the 1920s. Once sought after, the

area had become blighted by high levels of crime and

anti-social behaviour, along with the highest levels of

deprivation in the UK and parts of the estate had 70%

empty and abandoned properties.

Today, Cleadon Park is being successfully transformed

through a £132m redevelopment partnership (Isos

Housing, South Tyneside Council and Bellway Homes)

scheme involving the demolition of 538 homes and

the building of 741 new seamlessly integrated homes

for sale and rent, a Primary Care Centre, library and

community facilities.

Helping people into jobs and encouraging enterprise

is at the heart of the regeneration of Cleadon Park.

21 local people were employed as apprentices and

general workforce on the development site and three

local people were employed by Groundwork to provide

the landscaping works.

A huge amount of work has been undertaken to

educate and work with younger members of the

community. The partnership has funded football and

netball team strips, supported festivals in the area,

delivered building and fire safety workshops at the

local Primary School and funded bus passes for those

families that were temporarily moved off the estate.

An educational toolkit has also been developed

for use in Primary Schools in areas undergoing

regeneration. This has been accredited by the Homes

and Communities Agency.

The successful transformation of Cleadon Park has

been recognised via a series of awards, most notably

the Housing Corporation Gold Award for delivering

joined up development.

19

BEFORE REGENERATED

ExistingStock

DEMOGRAPHIC CHANGE Making the most of our existing stock is

not simply a matter of empty homes and

dilapidated properties, but recognising that the

North East’s current housing offer does not

meet the region’s needs, particularly when we

consider demographic change.

The Office for National Statistics (2013)

expects the percentage of the population

aged 65 and over to be one of the fastest

growing among the regions. It is projected

that by 2021, for every five people living in the

region, one will be aged 65 or over.12

As the baby-boomer generation reaches

retirement age and the proportion of those

aged 85 and over doubles by 2030, housing

need and requirements are changing –

changes the housing market is slow to reflect.

Demographic change undoubtedly poses

a challenge in the North East, with much of

our existing stock ill-equipped to cater to the

needs and aspirations that develop later in life.

Homeowners aged 65 and over in England

and Wales hold over £600bn of equity in

their property.13 Providing a range of housing

offers that reflect the diversity of people’s

circumstances and aspirations as they age can

help release this equity.

For instance, housing offering more storage

space; designed to cater for any health needs;

close to the local services and amenities

required; or offering a sense of community can

encourage older people to downsize, thereby

releasing equity and freeing up existing stock

more suitable as family homes.

The over 65s represent a flourishing market

opportunity. The North East housing industry

must rise to the challenge and capitalise on the

new opportunities they represent.

RECOMMENDATIONS• Local authorities and LPAs should

demonstrate a clear understanding of future

housing need, working with public and private

sector partners to deliver housing reflective

of the North East’s changing demographic

profile.

• The potential to adapt existing stock to meet

the needs of an ageing population and reach

this emerging market should be explored.

Financial incentives should be offered to

encourage this process.

• New homes for specific markets, such

as older people and students should be

developed in areas where this will free up

existing stock that is more suitable as family

homes.

20

CASE STUDY: NEWCASTLE AGE FRIENDLY CITY In Autumn 2011 Newcastle engaged with the

World Health Organisation Global Age Friendly

City programme with the aim of making the

City a great place to live for all ages.

Typical of much of the UK, the proportion of

the population aged 65 and over in Newcastle

is projected to grow significantly over the

next 20 years. With this in mind the Council

established the Age Friendly City Group to

understand the challenges and opportunities

of the City’s changing demographic profile.

The Group recognised that if Newcastle is to

be an age-friendly city, it must deliver the wide

choice of housing options and services needed

to cater to this burgeoning demographic

group.

The Older People’s Housing Delivery Plan

2013-2018 seeks to do just that and has

cross-party support to help older people

live independently in their own homes;

deliver more and diverse specialist housing;

and support older people to access the

information and advice they need.

Through a combination of investment, such as

the £25m Future Homes Fund, commissioning

and asset release, Newcastle is working with

public and private sector partners to harness

the benefits of making Newcastle a truly age-

friendly city.

21

Conclusion

Housing is an engine of economic growth and a crucial element of the North East economy. Its economic output is unrivalled by most other sectors and despite a history of an under-supply of new housing in the region, housebuilding still represents a £1.3bn contribution to our economic output.

Failure to deliver the number of homes we

need is not a new phenomenon. Indeed,

nationally for the past decade we have had a

recurrent undersupply of new housing. Political

parties of all persuasions have recognised

this, yet when it comes to how they would

address this issue and deliver more homes

there is a clear divergence in opinion and policy

responses. Accordingly, the confidence of the

housing sector is undermined and the delivery

of housing stymied.

Unlike many other regions, our capacity

for development is incredibly vast. With an

abundance of potential development land,

great resource availability and lower population

densities, the North East has a distinct housing

offer and should be a prime development area.

Ensuring the policy and economic conditions

most conducive to capitalising on this potential

are in place is a must.

Nationally, regionally and locally we need a clear

and long-term cross-party vision of the kind of

housing market we want and need, along with

a robust and sustainable delivery plan to realise

it. To this end, we need a delivery plan that

promotes a pro-development planning system

from the outset; a reformed and original

approach to finance; and innovative and

appropriate use of our existing housing stock.

In the North East, returns on capital

investment are typically lower than in most

other regions and as result securing finance

for development is a significant obstacle. It

is crucial therefore that the finance options

available are fit for purpose. Innovative public

and private financing options, mortgage

availability and financial incentives tailored to

the region’s needs will support our ability to

attract investment.

Our planning process should give the region a

competitive advantage for development. Well-

funded and highly skilled planning departments

are essential and the worrying tendency

for these departments to be targeted

disproportionately for budget cuts must end.

Equally, all stakeholders and decision-makers

exerting influence over a development should

work to ensure its success. Planning policy is

only one part of this. Local politicians must

not be afraid to show leadership and deliver

housing in the face of public opposition.

It must be noted that housing need in the

North East is changing. Over the next 25

years the proportion of the population aged

65 and over is expected to show the greatest

increase of all the regions. While this poses

a challenge to our housing market, it is

undoubtedly a huge opportunity. Older people

represent a flourishing market opportunity and

if our housing sector can provide the range

of housing options to meet the needs and

ambitions of this diverse group, we will be in a

great position to capitalise on these emerging

opportunities.

These must be underpinned by strong

leadership presenting a clear, proactive and

pro-development stance on behalf of the

North East. Whether this comes from local

authorities, combined authorities of local

enterprise partnerships is not important;

what is essential that a single body takes

responsibility for driving this policy agenda and

is willing to be held accountable for doing so.

22

Summary of Recommendations

23

FINANCE

• Review current public funding arrangements, with a specific focus on the North East housing market.

• Rationalise existing funding pots and ensure lending terms are proportionate to the level of risk.

• Review grant rates; increase supply-side spending; and support for risk-sharing arrangements.

• Showcase why the North East is an attractive option to developers to address perception that returns on capital investment are decisive to potential investors.

• Lenders work more closely with developers to identify the best funding options available, with a forum to facilitate discussions between developers and finance.

• Support continuation of Help to Buy.

• Exclude London from assessments of national housing market when judging national policy.

• Mortgage lenders demystify the application process.

• Extend deadline for implementation of CIL Charging Schedules.

PLANNING

• Coordination between all stakeholders in the planning process should occur from outset. Identify and resolve any potential barriers to development at earliest opportunity.

• Resolve contradictions in national planning policy.

• Delivery of up-to-date Local Plans.

• Local authorities identify sites for self-build to support delivery of small scale developments.

• Review greenbelt policy and depoliticise decisions about its release.

• Greater public support to make brownfield sites viable.

• Planning documents accessible to everyone, not just planning experts.

• Engage local community in planning process and challenge preconceptions that development is a bad thing.

• Planning to better identify types of housing need.

• Housing should generate greatest economic benefit for local economy. Public bodies have responsibility to encourage local procurement where they are financing development.

EXISTING STOCK

• Local authorities identify empty homes and appropriate responses, avoiding a one-size-fits-all approach.

• Increase powers of local authorities to address empty homes.

• Pilot schemes and regeneration projects to address negative perceptions aroused by empty homes.

• Increase financial incentives.

• Local authorities and LPAs to demonstrate a clear understanding of future housing need.

• Financial incentives to adapt existing stock to meet needs of an ageing population.

• New homes for specific markets to free up existing stock.

Housing TaskGroup

24

TRACY HALL (CHAIR), WATSON BURTON LLP Tracy is the group head of real estate and is chair

of the report task group. She has been involved in

a large number of major regeneration schemes

and having worked across the private and public

sectors, has a wealth of real estate experience,

Tracy undertakes a wide range of development

work, but has a particular specialism in residential

development. She adopts a cradle to grave

approach on development sites for developer

clients across the North of England to include

everything from prestigious private schemes to

slum clearance regeneration schemes, working

with public authorities and other stakeholders.

Recognised as a problem solver and an expert

in her field, Tracy has a very real interest in the

commercial fitness of the house builder market

and the forces which govern its effectiveness.

With a strong belief in both the private and public

sectors, she has worked to bridge the gap and

identify both opportunities and synergies.

DAVID SAXON, WATSON BURTON LLP David heads up Watson Burton’s Marketing &

Business Development Team and is responsible

for helping to grow the business as well as

managing the outward facing image of the

Firm. He joined Watson Burton in January 2014,

from the renewable energy industry where

he spent seven years marketing services to

businesses across the world for companies such

as Wind Prospect and Econnect and chaired the

Renewable-UK communications strategy group.

A professional marketer, David became one of

the UK’s earliest achievers of Chartered Marketer

status in 2002 and holds both a degree in

Management Science and the CIM Postgraduate

Diploma in Marketing.

KEITH LORAINE, ISOS HOUSING GROUPKeith is the Chief Executive of the Isos Housing

Group. Keith’s career began in local government

with a Metropolitan Council in the West Midlands.

Following a brief period in Somerset he joined

the Housing Association world with Anchor in

Manchester. His first executive position was with

the Beth Johnson Housing Group in Staffordshire,

where he was director of housing for five years.

Keith returned to his native North East in 1992

to take up the post of chief executive with the

Enterprise 5 Housing Association (E5) – a 900

homes community based association based

in North Tyneside. He has since built upon the

successes achieved by E5 to lead on the formation

and growth of the Isos Group, which now owns

and manages more than 12,000 homes across

the North East.

IAN STEWARD, JOHN N DUNN GROUPIan Steward is a Director of John N Dunn Group

Limited, a family-owned business established in

1893 based in Wallsend with over 300 employees,

specialising in the design, installation and

maintenance of plumbing, heating, mechanical,

electrical and renewable energy systems. John N

Dunn has worked with many major housebuilders,

housing associations and councils over several

decades.

Ian has lived, been educated and worked in the

North East his entire career and is passionate

about the region’s new build housing and the

current shortage of supply to meet the increasing

demand for private and social housing.

Ian has a keen interest in the forthcoming skills

shortage being addressed through greater

employment, apprenticeships and training to

meet future needs and was previously a board

member of SummitSkills, the Building Services

25

Engineering Sector Skills Council. Ian is also

a member of the IOSH Tyne & Wear Branch

Executive Committee.

SARAH ARMSTRONG, BARRATT DAVID WILSON NORTH EAST Sarah Armstrong works as a Senior Land Manager

at Barratt David Wilson North East. Established in

the North East of England in 1958, Barratt have

been building homes for more than 50 years

and in that time have grown to become one of

the nation’s largest housebuilders with more

than 5,000 direct employees and 27 divisions

throughout Britain.

Sarah has over 13 years of land buying experience

within the North East housebuilding industry.

Sarah joined Barratt David Wilson Homes in

2007, and whilst with the company has worked

extensively on numerous private schemes and

many public sector partnership schemes including

Elba Park, Lambton and The Rise, Scotswood.

Sarah’s expertise lies in procurement, planning and

legal arrangements.

MIKE HAMMOND, NORTHERN POWERGRID Mike Hammond is the Head of Connection

Services, leading the Connections business

of Northern Powergrid. Providing in excess

of 30,000 electricity connections per annum

Northern Powergrid plays a significant part in

regional growth and development in the North

East of England. Mike has worked in the electricity

distribution industry in the North East for 25 years,

having a wealth of experience in all engineering

disciplines and prior to this worked at British Steels,

General Steels at Scunthorpe.

During his time at Northern Powergrid Mike

has specialised in the development of industry

leading asset management process to improve

the efficiency of capital investment. Recently

his work has led to Mike working with other

businesses across the US Berkshire Hathaway

group, owned by Mr Warren Buffet, to improve

business performance. Mike is now leading

the transformation of the Northern Powergrid

Connections business to improve customer

service to a position where they are recognised by

customers as being class leading in the UK.

MICK BROPHY, GATESHEAD COLLEGE Mick is Managing Director of Business, Innovation

and Development at Gateshead College. He

has been involved in education and training for

over 30 years particularly in the field of work

based learning, apprenticeships and commercial

activity. His role has been predominantly working

with employers to ensure that training provision

meets their needs. Mick has also led the College

in the field of innovation particularly in low carbon

(Transport and Buildings) and has established

engineering and construction campuses to

respond to innovation through research and

capacity building as well as meeting employer

requests. Mick believes in partnership working

especially with employers recognising it is more

than a supply-demand relationship but is really

a close and trusting collaboration that draws on

the expertise of all partners to achieve agreed

outcomes that benefits learners and employers.

MICHAEL HEPBURN, NATHANIEL LICHFIELD AND PARTNERS Michael is a Senior Director in the Newcastle

office of Nathaniel Lichfield and Partners, a

town planning consultancy named Planning

Consultancy of the Year by the Royal Town

Planning Institute for the past three years.

After graduating with a Degree and Diploma in

Town Planning from Newcastle University, Michael

Housing TaskGroup

26

has worked in both the public and private sector with

the past 10 years spent at NLP.

Michael leads two teams that work with major

housebuilders and developers on a wide variety

of schemes from mixed use urban extensions to

accommodation for the elderly and students as

well as hotels, offices and leisure developments.

Together with his team, Michael covers all aspects

of the planning process from initial site appraisals

through to planning applications and is an

experienced expert witness at appeals and Local

Plan examinations.

MARK THOMPSON, RYDER Mark began his career at British Shipbuilding as an

engineering apprentice. Following the decline of

the shipbuilding industry, he joined Ryder in 1988,

qualified as an architectural technician at Newcastle

Polytechnic in 1990 and went on to study project

management and business at Newcastle University.

He became director of Ryder in 1995. In recognition

of his “influential and inspirational role within the

industry” Mark was made an Honorary Fellow

of the RIBA in 2003. As managing partner Mark

has ultimate responsibility for the strategic

development of Ryder, which over recent years has

included broadening the portfolio to sectors such as

higher education, transport, and the development

of international projects and the Ryder Alliance

which has resulted in a team being established in

Hong Kong and partnerships in Australia.

Mark is chair of blood cancer charity Bright Red,

vice chair of the NewcastleGateshead Initiative and

a member of the CBI North East Council and CBI

National Construction Council.

GEOFF WOODCOCK, ESH DEVELOPMENTS LTD. Geoff is Managing Director of Esh Developments

Ltd, the construction arm of Durham based Esh

Group, who turnover circa £270m in construction

and housebuilding.

He previously worked for Grainger plc in Newcastle

as Land Development Manager, leading on a

successful, community-based housing-led

regeneration project at Hadston and Widdrington

Station in Nortumberalnd, where former run down

rural coalfield villages were revitalised.

In 2007 he joined Esh Group with the brief of

supporting the growth and diversification of the Esh

Group’s housebuilding and development business,

progressing to his current role in 2012.

Esh are in the process of building 500 Affordable

Homes in the current HCA Programme, many

of these are being built on land acquired by Esh

Developments specifically for this purpose, with

successful planning applications even in the Tyne

Valley Greenbelt.

Geoff has also been leading the Group’s successful

collaboration with Swedish timber frame specialist

Sodra, which has led to the creation of a newly

formed Joint Venture company creating ‘Zero

Energy’ Sustainable Homes, branded as ‘Trivselhus

by Esh’.

LIBBIE HENDERSON, WATSON BURTON LLP Libbie is a partner in the Real Estate team and

advises on all aspects of land acquisition and

disposal for developers and landowners. In particular

she specialises in development for energy uses and

the energy aspects of development.

Her experience includes acting for national property

developers and energy companies in relation to

mixed use development projects and the real

estate, energy, minerals and structuring aspects of

those projects.

Libbie has extensive experience of leading

teams to provide cohesive real estate, planning,

environmental and commercial advice in relation

to all aspects of development projects including

remediation schemes and brownfield development.

Residential schemes of note which Libbie has

advised on include Elba Park Lambton and the 60

acre Bridgwater site delivering in conjunction with

neighbour land 2,000 homes, a school, retail and a

large regional distribution centre.

27

BRIAN ROBSON, NORTHERN HOUSING CONSORTIUMBrian Robson is Policy & Strategy Manager at the

Northern Housing Consortium, the voice of housing

in the North. The Consortium has over 400 members,

including the majority of housing associations,

local authorities and arms-length management

organisations across the North. Brian joined the

Consortium in 2011 from the National Housing

Federation, and has previously worked for a large

housing association and as a parliamentary researcher.

JANET HOPKINSON, SANDERSON YOUNG Janet is the Operations & New Homes Director for

Sanderson Young, responsible for overseeing the day

to day operations and management of the company

together with heading up the New Homes Division.

Janet moved to the North East in 1974 and has worked

in estate agency within Northumberland and Tyneside

for all that time.

Joining Sanderson Young in 2005, she has overseen

some of the region’s largest developments at

Grove Park, Elmfield Square, Gosforth, Lime Square,

Newcastle and Echo 24 in Sunderland. Smaller niche

developments have also been handled by the New

Homes Division and during times of slow market

conditions, due to the product and marketing expertise

offered, extremely good sales have resulted.

RACHEL TRAVIS, NORTH EAST CHAMBER OF COMMERCE Rachel Travis has been a Policy Adviser at NECC for a year

and a half, and specialises in procurement, planning and

regulation. Before NECC, Rachel worked for Sanctuary

Supporting Living as a Support Assistant, working with

vulnerable adults and teenagers living in supported

housing. Rachel holds a First Class MA in Geography and

Politics from the University of Edinburgh.

ROSS SMITH, NORTH EAST CHAMBER OF COMMERCERoss Smith was appointed Director of Policy in April

2012 after working as Head of Policy and Research at

NECC since May 2007. He is responsible for NECC’s

relationships with its 250 largest members, along with

overseeing NECC’s policy and campaign work, local

representation and public relations. Ross graduated

in politics and history from Newcastle University. Prior

to joining NECC he worked as a political journalist in

Northern Ireland and the North East and from 2004

to 2007 was Regional Affairs Correspondent at The

Journal. Ross is also a former member of the North East

regional council of the Arts Council.

NEIL BARKER, EMBARK ARCHITECTURE

ACKNOWLEDGEMENTS NECC and Watson Burton LLP would like to thank all

businesses, organisations and individuals who have

contributed to this report.

REFERENCES 1. The Lyons Housing Review: Mobilising across the

national to build the homes our children need, Sir

Michael Lyons, October 2014.

2. North East Economic Review: Submission by the North

East Housing Sector, NLP, January 2013.

3. New Home Statistics Review Q3 2014, National

Housing Building Council (NHBC), October 2014.

4. Home Truths 2014/15: North East, National Housing

Federation (NHF), October 2014.

5. New Home Statistics Review Q3 2014, National

Housing Building Council (NHBC), October 2014.

6. Help to Buy (Equity Loan Scheme) and Help to Buy:

New Buy statistics: Data to 30 September 2014

England, Office of National Statistics, October 2014.

7. Council spending to have fallen by almost 30% over the

course of this parliament, CIPFA, August 2014.

8. Brownfield land solution? Nathaniel Lichfield and

Partners, May 2014.

9. North East Economic Review: Submission by the North

East Housing Sector, NLP, January 2013.

10. Empty Homes Toolkit, Homes and Communities

Agency.

11. Home Truths 2014/15: North East, National Housing

Federation (NHF), October 2014.

12. Regional Profiles – Population and Migration – North

East, Office for National Statistics, March 2013.

13. HAPPI Housing our Ageing Population: Panel for

Innovation, Homes and Communities

Agency, 2011.

© North East Chamber of Commerce 2014

Publishing by the North East Chamber of Commerce

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