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Liz Peace, former chief executive of the British Property Federation and now senior independent governor at the RICS, is this week鈥檚 guest on the Home Truths podcast. 

Having focused on commercial property during her 13 years at the BPF until 2014, she has since taken up a series of high-profile roles including becoming the chair of the Old Oak and Park Royal Development Corporation, overseeing the delivery of thousands of homes in west London. 

She was also picked to chair the sponsor body overseeing the Palace of Westminster鈥檚 refurbishment in 2018. MPs later decided to disband the board 鈥� or, as Peace says in the interview, 鈥淪ir Lindsay Hoyle and Jacob Rees-Mogg said they wanted to take back control and do it themselves.鈥� 

In today鈥檚 podcast she talks about the many housing and planning reviews she has witnessed during her time in the property industry, and how successive governments have failed to tackle the fundamental problems in the housing market.

Jackie Sadek and Peter Bill, the podcasts鈥� co-hosts, ask Peace to explain her proposed financial model that could combine a government kick-start fund with private finance to build homes that would be genuinely affordable.

Here are some extracts from the interview, which is available to listen to via the player above or wherever you get your podcasts.

Q: Tell us about some of the non-executive roles had ever since you鈥檝e left the British Property Federation and how they altered your experiences

A: Well, my husband reckons I鈥檝e been training for a non-exec role all my life [where you] parachute in, give people the benefit of your opinion, and then bugger off. But actually, it鈥檚 not quite as straightforward as that. With being a non-exec come substantial responsibilities.

All of the roles I鈥檝e done have had something to do with the built environment, and quite a lot with a strong public sector basis to them. I chaired the Government Property Agency and helped set it up and got it running for a year or so before I before I stood down.

Sometimes in a non-executive role, you do not succeed. The Palace of Westminster [for example], I鈥檓 afraid the board that I chaired, we were sacked, because we came up with the wrong answer. So we were sacked. And Sir Lindsay Hoyle and Jacob Rees-Mogg said they wanted to take back control and do it themselves. 

I鈥檝e chaired Old Oak and Park Royal Development Corporation since 2017. That鈥檚 been a sort of labour of love and faith and [a case of] hanging on in there while we found a good solution. I鈥檓 delighted to say I think we have got a very deliverable solution now, but it鈥檚 taken a fair bit of failure on the way 鈥� and now we鈥檝e really got there.

I think one of the points we had to keep explaining to the London Assembly is that regeneration doesn鈥檛 happen quickly or easily. Look at any major regeneration project, and how long has it taken? How long has it taken to get Barking Riverside going? How long did it take ultimately, to deliver to deliver King鈥檚 Cross? How long is it taking Earl鈥檚 Court? You know, so regeneration projects are never are never straightforward.

 

I had stint at Redrow Homes and spent seven years on the board of Peabody, the housing association, where I learnt a huge amount about social housing and how housing development could support social housing. I鈥檓 now sitting on the University of Cambridge property board 鈥� they have quite a long time horizon, having been around for 700 years.

Most recently I鈥檝e taken up with a company called Greencore homes, run by Jon Di-Stefano, which has got a potentially disruptive model for building genuinely sustainable homes 鈥� not just net zero carbon, but negative net zero carbon.

Q: And what鈥檚 your role at the RICS now?

A: Following the difficulties they had two years ago, they appointed somebody called Michael Bichard to do a broad review of how to improve the way they manage their governance. One of his recommendations was that the governing council and the board should have a senior independent governor. I felt I knew the RICS pretty well from a public policy perspective; I knew far less about things like its standard setting and regulation, which I鈥檓 finding very interesting. But yes, there are some interesting challenges.

Q: Let鈥檚 start by talking about Kate Barker, her original review into housing in 2004 and the latest review she is working on.

A: Barker did two reviews, of course; she did one into housing, and then she did one into planning. And I think the second came about because, once the government received her findings on the first, they came to the conclusion that the answer to the housing problem was planning. So she was invited to do a second, I think it鈥檚 fair to say I remain slightly skeptical as to just how much difference her findings actually made.

I haven鈥檛 actually revisited them recently, but I don鈥檛 recall them moving the dial in any way. I find it intriguing that we鈥檝e gone full circle. And she鈥檚 coming back in to lead another housing review.

The interesting question to ask is what鈥檚 changed in in that intervening period? And it sort of feels like not a lot, and that we鈥檝e actually gone backwards. If you look at the housing numbers now, nobody鈥檚 meeting the targets that have been set. 

There are two things that are wrong with the current government鈥檚 鈥� and potentially future government鈥檚 鈥� perceptions of the housing industry. So let鈥檚 deal with this on housebuilders first. There are a relatively small number of major housebuilders. A commercial housebuilder builds what he can sell at the price that gives him a respectable profit. And if at any point he鈥檚 not doing that, he slows down in his building.

We鈥檝e actually seen over the last year or so a number of sites where the building has actually slowed down completely, because suddenly the housebuilders aren鈥檛 selling at the rates that they need to sell at to make that profit. Why should they build a whole load more houses [when] they鈥檇 have to reduce the price in order to get rid of them? That鈥檚 not in their interest. It is also an industry because of the way it鈥檚 constructed, where you just lay off pools of brickies, you lay off your carpenters, you don鈥檛 have to have directly employed labor force. So you just don鈥檛 hire them for that period.

So housebuilders will build what they can sell. Our potential new government is saying, 鈥淲e鈥檝e got to get the builders building again,鈥� but you won鈥檛 get the builders building again if there isn鈥檛 the customer base out there. And, of course, the customer base won鈥檛 actually solve the housing problem because a whole load of the people who need homes couldn鈥檛 afford to buy from a commercial housebuilder anyway. That鈥檚 [where we need more] social housing, the old council housing.

The second thing is the planning system: [governments say] 鈥渓et鈥檚 sort out the planning system鈥�. Well, I remember when I joined the BPF back in 2002, my predecessor said, 鈥淲hat you鈥檒l find is about every four or five years somebody in the government will have to have a major review of housebuilding. Everybody will run around in circles and think they鈥檝e come up with lots of brilliant ideas, and nothing will happen. And it鈥檒l all go quiet. And then five to 10 years later, the whole thing will start all over again.鈥� Point proven, I think.

Q: Except it feels more frequent than every five to 10 years, surely?

A: You鈥檙e right. But the problem [is] there is actually nothing wrong with the planning system as constructed. It鈥檚 how it鈥檚 actually used and implemented. It鈥檚 massively under-resourced, it鈥檚 been made massively overcomplicated, for lots of reasons. It鈥檚 become sort of stuck.

The only way you could fundamentally change the planning system, I believe, is by taking the democratic element out of the decision-taking. You put the democratic element in at the plan-making stage. You fix your plan. You have perhaps a system of zoning, design codes. So the point at which the planning application goes in, it becomes a technical matter: does it fit all these different criteria?

I don鈥檛 believe any government would ever make that reform, because I think it would be just too controversial. And if you鈥檙e not prepared to make that reform, stop faffing around with the system and look at how you can actually resource properly.

Q: There are 6.2 million households that cannot afford more than 拢100 a week in rent. Is the only rational answer to build a lot of houses where the building costs and the land are paid for by the state?

A: Part paid for, perhaps. If you鈥檝e got people living in homes, paying rent, you do at least have some element of income, which is not unattractive for people out in the investment world. It鈥檚 an incredibly steady income because you never get any voids. If you鈥檙e in private sector, you have the possibility of voids.

So I don鈥檛 see why with an element of subsidy, but not subsidy for the full cost, you couldn鈥檛 construct a model with some central government investment, which creates some sort of evergreen fund because you have income from all these different types of housing tenure, and you would be able to eventually repay the debt and and start all over again. It鈥檚 not perfect, and I don鈥檛 know exactly how it works. And I鈥檓 pretty sure you would still need something to kick-start it in terms of a substantial pot of government money.

Q: So you feel a revolving fund solution is there, with a bit of kick-starting from government?

A: Yes, probably quite a big kick-start. But then what are we spending on housing benefits? Let alone all the health outcomes from being inadequately housed? Kids growing up in hotel rooms where they don鈥檛 have a proper family life and all the other problems?

Q: Okay, if we put you in charge as 鈥済oddess of housing鈥�, how would you make your plan work?

A: So, you鈥檝e got to have a government that actually understands the problem. And this is where I really, really hope our new prime minister, whoever that is, brings in the right people who can talk to him about this. And it isn鈥檛 just the volume housebuilders. I think over the past decade or so there鈥檚 been a tendency to rely on one or two key private sector housebuilders who think it is all about planning. I鈥檝e already debunked that one.

Q: So if say Matthew Pennycook [shadow housing minister] became the next housing minister and wanted to bring this funding solution to life, what would you say to him?

A: I鈥檇 bring together a very small task force, not too many people 鈥� because there would be an awful lot of people angling to get in on this. So four or five key people from investment institutions, banks, and financial folk as well as Treasury. And you effectively lock them in a room until they come up with a scheme and how it would work: What would we expect from the from the private sector? What would we expect from the ongoing investment vehicle?

You would need to see what the bill was going to be up front. And then I鈥檇 asked the Treasury folk to do some sensible costing around what potentially that might save in overall public expenditure over the next 10 years, because that would be part of your justification for allocating funds.

 

Q: And the scope of it would be building houses that people can afford at council house rents?

A: It鈥檚 a council housebuilding programme. I don鈥檛 quite see why we have such an aversion to the concept of council houses. My granny lived in a council house. In fact, I lived in one for about the first year of my life, apparently.

Q: Would you have a target? Would you avoid a target? Or would you demand a target?

A: I would look at it from the perspective of the financial model initially, and ask how many could I actually achieve. Let鈥檚 prove the concept rather than setting a daft number that nobody can conceivably achieve. Let鈥檚 look at the art of the possible. If we managed to do 50,000 with this over a three-year period, then let鈥檚 see how we can roll that out and extend it.

Q: I think your financial modelling group would have to include land as well as money in their calculation. So in other words, you鈥檇 be giving the land to the fund, otherwise it doesn鈥檛 work. And then you get an argument about: what鈥檚 the land value to the current owner?

A: I agree. When I first joined the British Property Federation, this was when Lord Faulkner had come up with this idea of a tariff. So it was all going to be a tariff-based system and when you built a house you paid with the roof tariff.

But the Treasury pointed out this would effectively become a tax and therefore all revenue will go to the Treasury. So that all went for a ball of chalk. And if I recall, there were quite a few people in the property industry who thought it was quite a good idea, and would have been quite interested in that. Then, of course, from Kate Barker we got the idea of a planning gain supplement, PGS.

Now, Kate always said that she had only intended this ever to apply to homes, residential development. The government decided to move it forward based on all development, including commercial, and I can remember having a discussion about how totally impossible this was because you couldn鈥檛 determine the value of the building unless you had a transaction. And therefore how on earth did you determine the value of your planning gain supplement? If you鈥檝e got a house, it鈥檚 a lot easier, you build it, you sell it, there鈥檚 a number there that you can tax. So the BPF at the time fought strenuously against PGS.

And then finally, ministers and their civil servants came up with the idea of a community infrastructure levy [CIL], which was proposed by Labour. Then with the change to the coalition in 2010, the new government decided to keep it going.

I was subsequently invited by the government to do a review of it. The idea of CIL was actually quite good. It was going to be a relatively low level levy. So enough to actually yield something meaningful, but not enough for them to go into overdrive in terms of opposing it. And therefore, it was going to be very simple.

Q: But just to be clear, was that as well as section 106?

A: Section 106 was still necessary for the planning improvements without which a site would [not] be able to [be] grant[ed] planning permission. So if you鈥檙e building something, and it鈥檚 essential that to have a new access road, that would be a section 106 related to that site. The community infrastructure levy was about the much broader requirement for infrastructure across a wider area. So the fact that you鈥檙e going to be developing 5,000 homes in this area might actually need mean that the city or town needs to build a new doctor鈥檚 surgery or something, that would be funded by CIL.

Now, for reasons which I never understood, affordable housing was left in the section 106 bid for negotiation. Whereas I actually thought affordable housing ought to be part of the essential infrastructure. So the problem is that if you make your CIL too big, you鈥檙e putting pressure on your section 106. And therefore the affordable housing, because that鈥檚 the bit of the section 106 you can flex 鈥� because you can鈥檛 flex the absolutely essential road [that is needed for] planning purposes 鈥� so the section 106 housing bit gets squeezed out.

Q: Your review 鈥� what was your review about?

A: It was looking at how effective CIL was and what we could we do to improve it. And I must admit, I think that was possibly intellectually the most awful 12 months I鈥檇 ever spent because it was just so incredibly difficult.

We sat around agonising, and it was right back to the first principles: How do you manage to extract an element of the value in a way that is fair to both the landowner or the building owner, but also allows the state to benefit from the uplift in value for which an awful lot of people have done precious little, particularly a long-term landowner? We never came to a really good solution. We came up with an alternative. We looked at how to take out some of what by then had become a real industry around CIL. I used to say [to the lawyers]: 鈥淚鈥檓 trying to put you out of business here [because] what we want stop CIL being in the industry it has become, get it back to something very, very simple.鈥� We did come up with a series of recommendations, which of course were all totally ignored.

Q: One of the things we鈥檙e learning about 106 is it鈥檚 a very opaque process. The general public don鈥檛 know what benefits they鈥檙e getting out of this, out of 106 agreements with big developers. Is that something that resonates with you?

A: Yes, that, of course, was what the community infrastructure levy was designed to solve. The local authority in setting its levy was supposed to start off by looking at what additional infrastructure that development would give rise to. It wouldn鈥檛 be able to fund it all from CIL, so there would still have to be other mechanisms, but agreeing what proportion of vital infrastructure CIL would deliver was all supposed to be a totally transparent process.

If you made sure that all that infrastructure did come along with a housing development, then you would give the objectors less grounds to complain. And it鈥檚 not all to be planned and provided for by the developers; you鈥檝e got to have a local authority that鈥檚 robust enough to have planned it properly. But what鈥檚 the percentage of local authorities that haven鈥檛 even got an up-to-date local plan? I wonder what commercial business would get away with not having a strategic plan to present to its investors?

Q: Our final question 鈥� if you had a magic wand, what is the one thing that you would do to solve the problems in the housing sector?

I鈥檝e talked a lot about the financials, but I think part of that is getting the right settlement on land value. If I was being really wicked, I鈥檇 say in some ways you鈥檝e just got to nationalise the land supply, haven鈥檛 you? And pay back to the landowners a due proportion, but not all.