Short-term fixes won’t get us out of the housing crisis, Daniel Austin writes a letter to the government to explain what will
Dear next government,
Housing is at the centre of the election battleground. This is unsurprising given the economic uncertainty and that history shows that housing tends to lead the wider economy both into and out of downturns. We have recently seen small rises in house prices and mortgage approval rates to prove there are some green shoots but without some major changes it doesn’t look like we can build our way out of this recession.
We have a fundamental issue of a lack of homes for rent and for sale in the UK, which has created a major affordability problem with a knock-on effect on GDP. Housing has been a major social pressure in the UK for decades and we have seen no tangible actions to address the issue for years. We believe that a radical, yet credible plan is needed from each party to convince markets they can tackle the issue with a long-term plan not a number of short-term fixes designed to win votes.
You have suggested a target of 300,000 homes per year however this has been the target for the current government since 2004 and it has not been met once. France by contrast has built nearly twice as many homes as the UK since 1970 despite having comparable population growth. The shortfall in fact means, according to Capital Economics, that we now need 385,000 new homes a year.
The root of this problem has been four-fold. A reliance solely on the major housebuilders; a politically aligned planning system that deters councils from being pro-development; a net loss of social housing of 200,000 homes in the last decade as a result of demolition or sale through ‘right to buy’; and loss of construction workers post-Brexit. Without fixing the roots of this supply problem we will not solve the affordability crisis we are currently facing.
Get SME housebuilders building again
SME housebuilders can play a major part in meeting our housebuilding needs. Before the 2008 financial crash, small developers built 40 per cent of our homes; now it is just 15 per cent. Smaller developments and smaller companies are often better received in the local area, which helps with objections. But, we would urge the government to provide incentives so they can access opportunities. One example could be making local authorities allocate a percentage of their land in small plots to create a supply-side push. In addition, developers could be awarded fully permissive planning permission for brownfield sites of less than 2.5 hectares. Government-backed equity schemes would also give these smaller firms the balance sheets needed for projects. It would also be advisable to improve the public perception of the major housebuilders who are often very ill-received.
Boost skilled labour in construction
Finding good contractors has become very difficult, many now work in small teams which makes development projects much harder to manage. We need the next government to focus its efforts on creating more homegrown jobs as we can’t rely on overseas workers. To raise productivity, more work needs to be done off-site in factories which would attract more women and young people into the sector and reduce construction costs and build times.
Fix the planning system
The planning system is on the brink of collapse, plagued by a conflict of interest that ousts pro-development councils during local elections. This flawed process forces councillors to vote against their own plans, leading to costly delays as inspectors and the secretary of state become involved. The unnecessary logjams are costing developers millions. We must act decisively, demand independent decision-making to eliminate conflicts tied to re-election and call for private sector assistance to clear the backlog of applications. Time is of the essence; let’s ensure a fair and efficient planning system.
Prioritise social housing
To deliver the level of social housing required, we need to take the pressure off the private sector by empowering councils. Compulsory purchase orders need further reform, for example introducing some automatic conditions under which authorities can exercise compulsory purchase powers without paying hope value would simplify the process and avoid the need for authorities to ask the secretary of state what is officially deemed in the ‘public interest’ and avoid a flood of applications related to purchasing many small plots which would jam the system. Local targets should also be set to encourage powers they have been afforded.
Alleviate restrictions on conversions and brownfield sites
It’s time to incentivise developers to build on brownfield land. Support the automatic granting of planning permission for sites with plans meeting minimum ESG requirements. Let’s prioritise the use of existing buildings over new constructions, and advocate for the lifting of restrictions on conversion projects. Actively push for sustainable development and contribute to a greener future.
Lenders have an important part to play
Developments require capital and smaller developers will need to seek finance from challenger bank or non-bank lenders able to offer flexible terms and evaluate risk in changing market conditions. At ASK we will be looking to support well-capitalised developers with creative strategies to bring the much-needed new homes and commercial accommodation to market in line with occupier demand.
It is crucial to acknowledge that addressing the challenges our nation currently faces requires a sustained and committed effort. We urge you to stand firm in your commitment, even if it means facing temporary unpopularity. Embrace a pro-growth agenda and effectively communicate the repercussions of the supply-demand imbalance on home affordability. The issue at hand is distinctive to the UK, with the only silver lining being the influx of foreign investment into our real estate market. Investors seeking a secure haven for long-term capital recognise the potential underservice in our housing market for the next five to 20 years. To ensure a prosperous future, we implore you to take decisive action, leading us toward a balanced and sustainable housing market.