The issue of housing is a key focus in the current election. Given our shaky economy, and looking back at history, we can see that the state of housing often predicts wider economic trends. There have been slight increases in house prices and approvals for mortgages, indicating a potential recovery. However, without significant reforms, it’s not likely we’ll be able to build ourselves out of this economic slump.
There’s a critical shortage of both rental and for-sale homes in the UK, leading to a severe affordability problem that has negative impacts on our GDP. This housing strain has been a constant societal problem, but nothing substantial has been done to address it. A bold, yet feasible strategy from each political party is necessary to persuade financial markets that they’re serious about creating a long-lasting solution rather than offering quick fixes for political gain.
Your goal to build 300,000 homes per year has been on the agenda since 2004 but has yet to be achieved. In comparison, France has managed to construct nearly double the number of homes the UK has since 1970 despite similar population growth rates. Currently, we would need to build 385,000 new homes every year to catch up, according to Capital Economics.
The problem stems from various issues: over-reliance on big housebuilders, a planning system that holds back development-friendly councils, a reduction of 200,000 social homes over the past decade due to demolitions or ‘right to buy’ sales, and a decrease in the construction workforce post-Brexit. Until we confront these root causes, the affordability crisis will persist.
Empower Small to Medium-Sized Housebuilders
Smaller builders used to play a substantial role, constructing 40% of our homes before the 2008 crash, compared to only 15% today. They are generally more welcomed by local communities, which can reduce opposition to developments. The government should encourage these businesses by setting aside plots of land for them and offering automatic planning permission for smaller brownfield developments. Financial incentives, like government-backed equity schemes, should also be provided. Additionally, there’s a need to improve the community’s perception of large housebuilders.
Improve Construction Trade Skills
Finding capable contractors is challenging since many now work in small groups, complicating the management of building projects. The next government should focus on domestic job creation in this field, as we can no longer depend on a workforce from abroad. Greater off-site manufacturing would not only make the sector more appealing to women and young people but would also reduce construction costs and timelines.
Reform the Planning System
The current planning process is dysfunctional, leading to development-friendly councils losing out during elections. It’s a system which causes councilors to vote against their own development plans, causing expensive delays as the matter escalates to higher government levels. This needs to change. We should have an independent decision-making process and bring in private sector help to deal with the backlog. A fair and swift planning system is essential.
Focus on Social Housing
The government should focus on increasing social housing by giving more authority and flexibility to councils, including reforming compulsory purchase order rules. Local targets should be set to encourage the use of powers already given to local authorities.
Reduce Constraints on Brownfield Development and Conversions
We should motivate builders to choose brownfield sites by granting automatic planning permission for such projects if they meet certain environmental and social standards. Encouraging the upgrade of current buildings over new constructions, and easing up on the conversion restrictions will further promote sustainable development.
The Role of Lenders
Funding is crucial for development, and smaller developers in particular will look for flexible financing options from alternative lenders, backing developers that have the capacity and inventive plans to supply the needed residential and commercial spaces that match market demand.
It’s vital to recognise that overcoming these national challenges will take continuous dedication. We call on you to stay the course, even at the risk of temporary disapproval. Adopt a growth-minded agenda and clearly explain how the supply-demand imbalance affects housing affordability. This is a unique challenge for the UK but offers a silver lining as international investors see our real estate as a stable long-term investment opportunity. With decisive leadership, we can work towards a stable and sustainable housing market.
