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Cynulliad Cenedlaethol Cymru |
National Assembly for Wales |
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Pwyllgor yr Economi, Seilwaith a Sgiliau |
Economy, Infrastructure and Skills Committee |
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Rhwystrau sy'n wynebu cwmnïau bach sy'n adeiladu cartefi |
Barriers facing small home building firms |
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EIS(5) BFSHBF04 |
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Ymateb gan Residential Landlords Association Cymru |
Evidence from Residential Landlords Association Wales |
Thank you for the opportunity to respond to the above consultation.
The Residential Landlords Association (RLA) represents the interests of landlords in the private rented sector (PRS) across England and Wales. With over 30,000 subscribing members and an additional 20,000 registered guests who engage regularly with the Association, the RLA is the leading voice of private landlords. Combined, the RLA members manage over a quarter of a million properties.
The RLA provides support and advice to members and seeks to raise standards in the PRS through its code of conduct, training and accreditation. Many of the RLA’s resources are available free to non-member landlords and tenants.
The Association campaigns to improve
the PRS for both landlords and tenants, engaging with policymakers
at all levels of Government to support its mission of making
renting better.
Context
Recent analysis from the Chartered
Institute of Housing Cymru indicates that the PRS is likely to grow
to 20% of all housing tenures by 2020 and would become the second
most used housing option only behind owner
occupiers.
Some
of the main reasons for this growth are:
Flexibility – as both the UK and Welsh Governments
have previously indicated, rented housing is important in
supporting a flexible labour market.
Choice – an increasing number of people prefer the option of renting to buying a house of their own. Research by OnePoll, for the property investment company Knight Knox, found that 60.6% of tenants in private rented housing said that they are content with renting citing factors such as “not willing to be tied down to a mortgage” and “renting better suiting their lifestyle”.
Affordability– Many people need to reside in the private rented sector because of the increasing difficulty in affording a home of their own.
While the cost of home ownership in
Wales is significantly lower than in most parts of England, there
remains several areas, particularly in South East Wales, that
remain unaffordable for many and the biggest barrier to home
ownership is raising a deposit.
Clearly the PRS will play a major part in solving Wales’
housing shortages and we believe there is a strong traction between
PRS landlords and small building firms. Landlords, whether acting
as individuals or as small to medium sized companies, have
significantly invested in new buildings, flat conversions and often
the redevelopment of small plots of land. Rather than being
in direct competition with the building of first time homes and new
builds, small builders and PRS landlords are often best positioned
as net providers of housing through developments and conversions
and play a significant part towards the solution in solving the
housing crisis and should not be legislated out of existence.
Accordingly, the continued viability of the PRS and small
developers in developing housing is not only essential to develop
the increasingly important PRS sector, but to play a major role in
tackling the housing crisis.
The RLA recognise that the planning process is a necessary control to balance the housing need with safeguarding the characteristics and environment of local communities. However, the increase in costs and time to go from outline to implanting planning permission is a barrier to many small builders. Accordingly, we call for a simplified planning system where smaller, often less contentious plots of land are given priority and are considered using delegated planning powers rather than via the formal development committee route.
In terms of construction work carried out by SMEs, a significant proportion of this work is carried out on the conversion of flats and HMOs, which can often involve expensive and specialist work. However, such opportunities provide affordable housing to the low waged and would be possibly deemed undesirable to larger firms. Planning policy in these areas are stipulated in Local Development Plans and Supplementary Planning Guidance under the framework of Planning Policy Wales. Following consultation with several SME developers in the Cardiff area, we recognise clear and legitimate concerns on potential planning policy and while we recognise this is a matter for LPAs, we believe the Welsh Government have a role in influencing local policy making.
We recently responded to Cardiff Council’s consultation on their draft Supplementary Planning Guidance on flat conversions and we raised concerns over proposed policy on affordable housing contributions being set at 20% when building five units or more. We believe that such a level will negatively impact SMEs and will result in less affordable housing options being built for the low waged and vulnerable. We were equally concerned about minimum room size restrictions particularly for studio apartments when surely the priority should be at making the most out of buildings with the current proposal doing nothing to improve the overall quality of housing. Accordingly, the RLA called for a less prescriptive policy framework, which would consider the needs and restrictions of SMEs.
The planning process has more recently become increasingly complex and bureaucratic and even where new measures and processes make sense, they have often acted as an additional barrier to small builders. The demands on developers producing Sustainable Urban Development Plans (SUDs), might be a useful measure in planning for the management of surface water and drainage. However, they are another example of an additional layer of bureaucracy that without support further excludes small builders from the process. Not only do the production of the plans further constrain the time and costs of small builders, many smaller developers do not have the expertise in drainage methods including the use of greenery as a source in dealing with surface water.
Even where local authorities have been supportive of small builders, the task has become considerably more difficult due to the continued constraints on public sector finances including local authorities. In many local authorities’ planning departments have been cut disproportionately compared to other statutory services, resulting in many planners having less capacity to deal with multiply small builders and preferring to deal with one or two larger firms, even when the will to support indigenous small firms was there. A major asset to small developers would be improved access to the planning process with more discussion between small developers and planning departments.
An additional function other than planning offered by local authorities is economic development. However, economic development is not a statutory function and in the context of current public-sector finances, it is difficult to see local authorities investing in economic development teams with the aim of supporting SMEs and small builders. This has resulted in a postcode lottery where some builders have greater support depending on which local authority area they operate in where as some have no support.
While taxation remains an area largely reserved to the UK
Government, the RLA has long called for a tax policy that is
supportive of SMEs and PRS landlords. We have called for the UK
Government to consider tax incentives through Capital Gains Tax
(CGT) and similarly we call for the Welsh Government to implement a
supportive environment in the development of building homes through
tax incentives through Land Transaction Tax (LTT.)
Finance options to small and
medium builders
The RLA are supportive of the Welsh Government plans to issue an
initial £40m Stalled Sites Fund aimed at small and medium
building firms to construct on sites that have been delayed. While
this might unlock additional housing and support SMEs, these sites
are often contentious and subject to delays. Accordingly, we
believe that to unlock their potential the Development Bank of
Wales has a role in supporting SMEs by using a similar methodology
from Germany who have adopted a state funded lending scheme to
protect lenders from liability while maintaining low rates to
firms. This could act as an extension to current schemes such as
the £30m Wales Property Development Fund.
The RLA are concerned about the impact Brexit will have on skills and the construction industry with the sector being heavily influenced on foreign labour and skills. As a matter of urgency, the RLA calls for the UK Government to clarify the status and rights of existing EU nationals living in the UK in terms of the right to both live and work in the UK. We also recognise the impact that the 2008 recession has had on the industry with many skilled workers leaving the sector. While this is a concern, it might also be an opportunity for SMEs to step up and plug potential skills gaps both in terms of domestic and foreign labour shortages.
The RLA have long called for high standards across housing, from the landlords we represent to the builders who build the homes. We call for improvements in the image of the housing sector to eliminate and sanction those that do not up hold these high standards and to attract new recruits into the industry based on these standards. The RLA also calls for a renewed focus on apprenticeship schemes, widening access to construction skills to groups underrepresented in the sector and an overall improved image of construction skills as a viable education and employment route. If skill shortages are as much as a concern as they are deemed to be, perhaps incentive schemes to train could be considered from the Welsh Government as they have in other professions such as in teaching.
In terms of skills, one barrier is accreditation of CSCS cards,
which give smaller traders the necessary accreditation to gain
access to sites. In this context, the Welsh Government should
improve access to CSCS training while maintaining these important
health and safety regulations.
The RLA believes that any future LDPs or similar housing allocation assessments should put greater emphasis on small plots of land, particularly small plots of land owned by the public sector as potential sites for housing provision. In this context, the RLA are calling for LPAs to break down candidate sites into smaller parcels of land.
The RLA draws attention to the
current trend of LDPs in identifying large parcels of land across
LPA areas in Wales. Examples include Margam Village in Neath Port
Talbot, Plasdwr in areas of west Cardiff and Park Derwen in the
Coity area of Bridgend as just some examples of large scale
development. While these developments undoubtable play a
significant role in reducing housing shortages, they remain
financially restricted for many SME building firms. Smaller plots
of land, which might not be of interest to large scale developers,
would be more desirable too small to medium sized building
firms.
Improving access to publicly
owned small plots of land
The RLA have long called for small plots of public sector land to be redeveloped as homes to rent. We note that these small plots of land would be considered undesirable by larger building firms and resultingly become vacant and magnets for anti-social behaviour at a time when many local authorities are under pressure to identify deposit sights as part of the renewal of their Local Development Plans (LDP.)
We propose that public bodies such as the Welsh Government, local authorities and the NHS et al, identify small plots of land that could be used to build small plots of up to five homes for the PRS.
There could be various models for land transfer:
· The public owner of the land retains ownership of the land and receives a share of the rental income that reflects the land value as an overall proportion of the developed property.
· The land is transferred for payment once the building has been erected or converted and completed. This would mean that the landlord would not have to finance the land purchase up front, avoiding paying the holding costs.
· The land is held back on a longer lease for the covenanted private rental period. This would mean that the landlord would not have to finance the land purchase at the outset. This model would encourage the landlord to build new units and improve property standards, rather than buy older, cheaper stock. Leaseholds of 125 years would create equity for lenders.
·
Under these plans there would be a minimum 10-year requirement for
renting out in the private rented sector. No affordable housing
contribution would be required and there would be an exemption from
Community Infrastructure Levy. At the end of the 10-year
period, the landlord would be expected to refinance, but equally
they would be free at that point to sell and the user restriction
would be lifted.
The dominance of the Welsh construction industry by a small number of big building firms, is not solely restricted to housing alone. The construction of public sector works including the 21st Century Schools Programme, while contractors do sub contract to smaller firms, is evidence of their dominance.
The RLA is broadly supportive of the Welsh Government’s support of small businesses through business rate relief of non-domestic rates. However, this might not have as significant impact for small builders and certainly would have no impact for PRS landlords. Business rate relief is a good example of how the Welsh Government can support small businesses. However, we call on the Welsh Government to consider additional tax incentives such as Land Transaction Tax or Council Tax reduction for small builders and developers.
While the RLA are very supportive of the Welsh Decarbonisation Programme, we call for any policies to reduce carbon emissions from new builds and existing homes, to be mindful of the impact policy could have on the ability of small and medium developers to produce more housing. As part of this agenda, we call on the Welsh Government to foster an environment that will address carbon emissions from homes but will not exclude small developers. Accordingly, we call for greater consideration of tax incentives, loans and grant schemes and a linkage between home values and decarbonisation. Given the impact skills and material supplies have on decarbonisation, as a matter of course, small developers should be encouraged as widely as possible in developing new homes.
The Help to buy scheme is a viable scheme to help people get on the property ladder and the RLA believe that small builders can contribute towards the construction of new builds as part of the scheme. However, while Help to buy is a useful scheme, it should never be naturally assumed that everyone wants to buy a home. As we have outlined in our opening contextual statement, the PRS is growing in terms of number of occupants. A significant number of people do not want to buy a home because it does not fit into their lifestyle, they would prefer flexibility, or they simply do not want the milestone of a mortgage. The PRS is increasingly becoming an option for more vulnerable, elderly and large families. While Help to buy has some merits, a scheme where participants must provide even a 5% deposit remains out of reach for many. In this context, we wish to make it abundantly clear that while we think there is merit in the delivery of the Help to buy scheme for the inclusion of small builders, it would be remiss of us not to raise concern on over reliance on the owner occupied sector and we call for small builders to be included across all sectors in the delivery of housing including the PRS and social sector.
The RLA believe that small builders are in a strong position to be involved in the delivery of affordable housing. However, as stated earlier in this paper, we do not support overly prescriptive obligations to enforce affordable housing contributions on SMEs that do not reflect their financial viability to deliver housing.
Rather than taking the ‘stick’ approach, we believe
that SMEs could support the delivery of affordable housing by
greater partnership working with RSLs who in turn could offer them
more contract work by breaking down social housing sites into
smaller parcels of land. The RLA recognise that this would likely
to be more expensive than relying on one major firm. However, the
impact on the Welsh economy could be great including greater market
share to Welsh SMEs, increased use of local supply chains and more
local employment used.
Procurement
Like the planning process, procurement policy often serves as a minefield and a further barrier excluding small builders.
Where there has been good policy and developments in the field of procurement such as the McClelland review of Welsh public procurement and the Welsh Procurement Policy Statement 2012, which was followed up and updated in 2015, the aspirations and key messages do not appear to have been followed up by many Welsh local authorities with a clear disconnect between Welsh Government policy and local delivery. Where procurement policy has been implemented, effective monitoring and enforcement is often weak offering weak safeguards to support small developers.
We would like to take this final opportunity to thank the National Assembly of Wales for the opportunity to highlight our concerns in this area. We look forward to reading the collated response and final recommendations.