As the elections draw near, housing has become a central issue, which isn’t surprising given the current economic volatility and the historical trend of housing leading economic recoveries and recessions. There are early signs of improvement with slight upticks in property prices and mortgage approvals, but significant reforms are required to overcome the recession through construction.
In the UK, there is a critical shortage of homes for both purchase and rent, resulting in affordability issues that negatively impact our GDP. Long-standing social tensions are tied to housing, and despite years of inaction, it is essential for each political party to propose a sound and transformative strategy to persuade markets of their capacity to address this with enduring solutions instead of temporary vote-getting measures.
Your promised goal has been to build 300,000 homes annually, yet since this target was set in 2004 by the current government, it has never been achieved. France has managed to construct nearly double the number of homes compared to the UK since the 1970s, despite having similar population growth rates. Capital Economics suggests we now need to aim for 385,000 new homes per year to catch up with the deficit.
The heart of the issue can be attributed to four main factors: dependence on large developers; a planning system that discourages council cooperation due to political influence; a decrease of 200,000 in social housing over the last decade through demolitions or sell-offs; and the loss of construction workers following Brexit. Without tackling these fundamental supply issues, the problem of affordability remains unresolved.
Encouraging Small and Medium-Sized Housebuilders
Small and medium-sized builders were responsible for 40% of new homes before 2008; today, they only produce 15%. These builders tend to be more welcomed by local communities, which can ease planning objections. The government should incentivize them to access opportunities, such as allocating land in small plots and granting permissive planning for brownfields under 2.5 hectares. Additionally, financial support for these builders and better public relations for large developers are needed.
Increase Construction Workforce Skills
Securing skilled contractors is becoming increasingly difficult, as many work in smaller teams which complicates project management. The future government needs to focus on creating jobs within the country as reliance on international labor is no longer viable. To boost efficiency, more construction should take place in factories to reduce costs and attract diverse workers, including women and the youth.
Revamping the Planning Process
The current planning system is in dire straits, with pro-development councils often voted out due to conflicts of interest, resulting in expensive and delayed decisions. To avoid this, there is a need for independent decision-making away from election pressures, and hiring private sector help to manage application backlogs, ensuring a fair and effective system.
Focus on Social Housing
To provide the necessary amount of social housing, local councils need to be empowered. Simplifying compulsory purchase orders and setting local targets could help alleviate the pressure on the private housing market.
Relax Brownfield Regulations
Facilitating construction on brownfield sites is paramount. The government should grant planning permission to environmentally sustainable plans automatically and ease conversion project regulations to emphasize sustainable development.
The Role of Financial Institutions
Development financing is crucial, with smaller developers often seeking alternative lenders that offer flexible terms, it’s essential to support developers with strong capital and innovative approaches, to meet the demand for new homes and commercial spaces.
It is imperative to recognize that addressing the nation’s housing challenges requires steadfast commitment. It is also crucial that the incoming administration maintain its promise, even in the face of potential disapproval, by adopting an agenda that supports growth. Actions must be taken to address the supply-demand disparity impacting housing affordability. The UK’s unique situation does have a brighter aspect with foreign investments recognizing a continuous demand in our housing sector for the next couple of decades. For a thriving future, we call on decisive and balanced efforts to stabilise the housing market.
