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Sir Robert Kerslake – the full interview

The Homes and Communities Agency will be Europe's largest housing and regeneration body. Incoming chief executive Bob Kerslake talks to Nina Lovelace

What is the Homes and Communities Agency's role?

I personally describe it to be about creating opportunity for people and places. What I mean by that is creating the opportunity for people to live in a house they can afford in a place they want to live in and the opportunity for local authorities to deliver their ambitions.

And it does that by being a very powerful partner, understanding the market first of all – what do people want – and also by being a very powerful partner of local government, but also working exceptionally closely alongside key stakeholders such as the private sector.

How do you aim to work with the private sector?

I’ve already started some part of that dialogue – I’m in the business of setting up meetings with the key private sector players. I’ve had some contact with the house builders but quite a lot working with commercial developers in my current role in Sheffield. So I do come with a lot of knowledge around those issues, but still a lot to learn about the dynamics for the key private sector housebuilders and that’s a key area for me in terms of my induction.

It’s very important to me as this agency will stand on or fall on how well it understands and can shape the market. That’s got to be a key feature of it and therefore I want it to be an agency - I’ve described it as ‘market facing’ – that has a really good understanding of how the market works and how we can shape the market to help us deliver key policy goals.

What added value will the HCA bring over English Partnerships and the Housing Corporation?

Critically what it will bring is the flexibility across funding streams to deliver outcomes. What typically happens is there are individual funding streams to deal with housing supply, that deal with growth, that deal with affordable housing…’s quite complex and often I don’t think we get the most out of the capacity, the resources we have.

I think this is an agency that will be able to work across the funding streams in a flexible way both with local authorities but with private and independent partners. I also think it will add value by being market facing and innovative – willing to try new approaches.

Are you concerned about current market fluctuations?

We are seeing a slowing down of the market I think. Clearly that must have an impact on the private house builders but it also has an impact on the supply of affordable housing because much of them come through section 106 planning gain.

So these things are all intertwined in the way the market works and yes I’ve given considerable thought to how we manage that. What I’d say is though that the underlying drivers- particularly the imbalance between the growth in demand and the growth in supply – have always got to be kept sight of we mustn’t lose sight of, and these are the things that will impact on price over time.

And yes we will see market fluctuations and part of the role of agency is to maintain the development of new housing and supply during this period of market slowdown, as I think it would be clearly problematic for the new agency if we see starts fall, but I also think there will be missed opportunities for the house builders as well.

We can try and adapt what the agency itself does in the light of those market conditions…so for example what English Partnerships has thought about where they break down sites into smaller areas. There is an issue on whether you can assist on some of the risk on bringing sites forward.

We also need to prepare for the likely upturn [in the market] in due course. Now I’m not able to say, I’m not sure anyone is, with certainly how deep and how long at the moment that is away, but we can be fairly confident that we will be out of this in the near future and we need to prepare for that as well.

Are targets such as the three million homes by 2020 at risk?

We are talking about quite long gain targets and we should try to adapt to the changing markets. I wouldn’t want to say that the current market conditions put that at risk. Clearly it would be easier to achieve in a buoyant market than a slowing market, that’s a statement of the obvious.

The absolute target is very important but I think what is often forgotton is that this is also about a market shift. Getting to a situation in which a naturally performing market is delivering the rate of housing building the match the demand, as well as delivering these absolute numbers.

The agency alone can’t do that – there are a range of players involved – but the agency plays an important part and will play the key part in the delivering of affordable homes target. It supports this delivery of the big number but secures the delivering of the affordable.

How will you deal with issues between local government and the private sector that threaten growth?
I think there are a number of dimensions to this – I personally think the intellectual argument for the need for more house building is convincingly made. It’s an open argument as to whether the popular one has been won however.

And by that I mean people will broadly be sympathetic to house building but whether they recognise it in their locality is another matter. Local authorities are very much influenced by popular opinion in the places they are, and often in those situations people are much more attuned to the potential drawbacks to housing development as they are to the benefits.

And I think part of the role of the agency is that often the scale of change is quite demanding – and often some of the areas of biggest change are where there are some of the smallest authorities. And I think the agency can help with that. I also think it should work with local authorities on the issue of infrastructure in its wider sense – a bit of feedback you often get is that their resistance on new housing building comes from residents who can see the benefit for others but see very little for themselves.

There’s no magic solution but part of what the agency should be working on with developers are on understanding the issue for local communities in terms of what they need. Some times its transport, sometimes its community facilities.

We’ve set ourselvess up with a challenge – we want to create many new homes, but in previous waves on this, they were public sector driven. This one relies much more on the mixed economy. The other contract to the past is that many of the public sector projects, well we’re having to deal with the consequences of not getting them right.

So we have to remember it’s not just about the numbers, we must create sustainable communities, and of course we have the added challenge which is the carbon footprint. It’s a more complex world and the challenges are bigger.

I think we can play a role there – helping with capacity, and bringing expertise where there are challenges, and hopefully being a bit of a bridge between the different worlds of local government and the private sector. I’m acutely aware as some one has worked with the private sector in Sheffield, that they have very different cultures, and much of the difficulty comes from that culture clash, that different style of communication.

You won’t through that route simply wish away some of the big challenges we face but I think it will help to have people who have as good an understanding of how the public sector works as how the private sector works. And I do see that as a key role for the agency.

How will you get to know the private sector’s concerns?

My programme is a pretty big induction programme. It will incorporate local authorities, housing associations, and the private sector.We envisage the new agency of doing two quite substantial consultation exercise – one this side of the summer and one post the summer break. We want that to be a way of communicating what we’re about, but we want to hear about how things look for others’ perspectives.

Do you think the HCA is too big to achieve what it wants?

It’s got a very big budget but in terms of staffing it’s big, but not that big. How does it manage that? I think we will work on a very powerful regional structure – there will be strong regional teams. At the moment that isn’t the structure of the existing body, but they are aligned with the regional structure.

Wherever you go you’ll see a balance between growth and renewal. In some places the agenda is predominantly growth. In other places the agenda is still probably renewal – such as perhaps Stoke on Trent. Some places have gone through a renewal and are now in growth, such as Sheffield. The ability for the agency to understand and to respond to the local conditions I think is key here.

You talk about new models for housing delivery – what are they?

All of these mechanisms are means to an end. I think the Local Housing Companies do offer potential. There are different variants but the model I’m familiar with from the Sheffield context is one in which the local authority establishes a joint venture not with a builder or developer necessarily but a funder. The LA puts in land to the deal – that land is put in on an equity basis, not necessarily for free.

With a mix of market housing for sale and affordable housing, then you then reinvest any receipts you achieve back into the mix.

You can through that route change the funding model potentially – and that’s to be proven – reduce the finance costs and potentially that bidders or developer takes a slightly different role. It also allows you to invest early into some of the infrastructure. This helps you to reduce the financing costs, and to manage the risk, and in return the local authority gets more affordable housing in the wider sense.

Depending on what the model is, potentially some of your early costs reduce, and if your role is not necessarily to do the speculative development but to do the construction some of your risk is reduced as well. These are all ways to unlock development and capture value to reinvest. My view is that there are a number of approaches but this one has a lot of potential in terms of low cost home ownership.

Do you have any final messages to house builders?

As Callcutt referred to in his report, there are profitable business that don’t get the value they might otherwise justify because of the fluctuating market that one minute can be booming and then dipping in very short order. I want to work with the market to see help them though that. In return I’m looking for the more open to approaches and more ideas.

What are their views on new models of development? If access to credit is difficult or expensive the public sector might be able to assist on that in return for lower rates of return. These are all things but we’ve got to find common cause on innovation on new building methods to meet carbon emissions standards.