The U.K. government could help encourage investment that would help address the country's housing shortage if it clarified its plans for infrastructure investment, Adrian Penfold, head of planning at British Land Co. Plc, told a conference.
British Land, the U.K.'s second largest REIT, is interested in meeting demand for more homes, Penfold said, but it would appreciate more guidance from the government to help identify areas set for improved transport links and thus with better investment potential.
"As investors, we find it helpful to have clarity about where government will support growth and infrastructure, so we'd encourage the government to be clearer about its regional priorities," Penfold said during a presentation at a British Property Federation conference on planning, held in London on March 29.
The U.K. government is currently in the process of consulting with the country's real estate sector on a "White Paper" — or policy document — it released in February titled "Fixing our broken housing market." Between 225,000 and 275,000 new homes are needed in the U.K. every year to keep pace with population growth, but only an average of 160,000 new homes have been delivered annually since the 1970s, according to the document.
London is particularly affected by the housing shortage, which the white paper alludes to in its first section, "Planning for the right homes in the right places." Penfold highlighted the work that the Greater London Authority and Transport for London were doing to "identify growth locations" benefiting from the Crossrail 2 infrastructure project. "That work needs to cross the GLA boundary," he added.
The development of new homes on the outskirts of London has long been restricted by the "Green Belt," an area of land protected from development since the early 20th century in order to prevent urban sprawl. The blinkered focus on preserving the Green Belt was central to the city's housing problem, said Penfold. "Identifying massive areas of constraint in a region, the Green Belt, without identifying areas of growth as well, is not a sustainable way of planning a region," he said.
While British Land has some residential exposure in its portfolio, the vast majority of its assets are in office and retail. Residential makes up only around 1.4% of its portfolio's total value of £13.92 billion and is comprised of four properties, all in London, according to data compiled by S&P Global Market Intelligence.
The company has another two residential assets under development in London, Aldgate Place Phase 2 and Crystal House-Ealing Broadway Shopping Centre. Three more mixed-use assets with residential components are under development in the U.K. capital: Canada Water, Eden Walk and Putney High Street-Expansion.
U.K. authorities should also clarify to communities the need for high-density residential developments in urban areas if the country's housing shortage is to be addressed, Penfold said. British Land has encountered resistance from local communities that have campaigned to revoke planning permission for residential schemes in their areas.
Plans for the company's Putney High Street development were initially rejected by Wandsworth Council, over concerns about the height, design and existing high pollution levels in the area. This led to an intervention in October 2015 by then-London mayor Boris Johnson, who overturned the decision on the grounds that it was beneficial to the city as a whole.
"In many cases we go into a local area, we go into a local community with our proposals for quite dense housing development in town center locations close to public transport — and the community rise up against it," said Penfold.
"And it often appears that the first time that community has any awareness of this policy of increased density in these sorts of locations is when we come along and present our proposals to them. That to me is a failure of the plan-maker process," he said.