But in recession, where the developer struggles to find working capital and profit margins are threatened by doubts about future house price rises, the public sector finds that this gap-funded model is more difficult to work; whilst also finding that the grant has more potential leverage, if used smartly.
The most obvious immediate leverage comes from the ability to “de-risk” a project. This means using public sector cash to fund early site investment - remedial works and infrastructure – so that houses can be build more quickly and predictably. In return, the developer should be negotiated into delivering a better value result for the public sector’s social objectives (i.e. better value for money).
But there are much bigger opportunities to be grasped. In recession, the developer’s negotiating position has weakened relative to the public sector. The developer-led model itself can be examined and changed. If we are spending public money on housing, can’t we demand that it buys more than housing units? Can’t we require that it helps to build communities?
Let’s take step back. Why do we need to build so many houses? The answer is linked to population growth, yes, though the projections may need to be altered (reduced) to take account of the recession and the reduction in attractiveness of the UK to immigration. But the other driver is the reduction in household sizes. We are a more fractious society: we fall out with each other more, and live in smaller (unhappier) groups. It must surely be an objective of public funding that it helps reduce that fragmentation and lack of cohesion; that the way we spend our money promotes greater harmony. But the typical developer-led, house units oriented model does quite the reverse. It uses contract labour from outside an area; places an emphasis on cost management, which results in uniformity of product; and places a premium on planned rather than organic implementation. In other words it places control in the hands of an external agent, rather than in the hands of the community or potential community. This matters because a sense of being in control of your life links directly to lower stress levels, improved health outcomes, lower crime, and to greater educational and economic attainment: the very things the public sector is trying to achieve.
So, if we can find a more inclusive way of building new housing developments, we will have a long term impact on a wide range of other public sector performance indicators. Though such an approach is likely to cost more per housing unit, we should, over time, find that we need to build fewer houses, since more families will stay together, so reducing the cost overall. An inclusive approach would incorporate some or all of the following: local labour; sweat equity options, devolved planning frameworks, participative masterplanning, community land trusts. If, for instance, unemployed young men were actively encouraged to help build new houses in their neighbourhoods, it would: (1) give them something to do with the excess energy which is characteristic – for good and ill – of this category of human; (2) provide them with marketable skills; (3) give them a sense of joint ownership; a sense of place; the chance to protect, rather than damage, their area. Remember the barn-building scene in the film, Witness?
In short, public sector capital spend could be used – now – in a way which treats the target market (the “deprived”, the “hard to reach”, the “minority communities”) as fellow Adults, rather than as Children to the public sector’s Parent. As such it would reduce their dependency over time, decreasing the required spend. This argument has particular strength in the context of new housing developments, but also applies to all other local infrastructure projects – schools, health facilities, community buildings.
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