Will the new Tory Government solve the UK’s Housing Crisis?
In cold daylight, here are the facts. There are currently 108,000 more households than there are homes in London. Unless more homes are built, the shortage in the capital will increase by 30,000 households a year. Ultimately, Britain needs to build 240,000 new homes each year to cope with demand, 70,000 a year more than the current rate. If we don’t, the whole country will fall into a housing shortage by 2025. In this environment, upward pressure on prices can only continue: great for investors, not so great for homeowners.
Is enough being done?
So, to Parliament. Are they up off their haunches fighting the battle as hard as they should be? Prime Minister, Theresa May recently announced an ambitious plan to build an additional 225,500 new dwellings – the biggest house building project in Britain since the rebuilding program that followed World War 2.
This would be a vast improvement on the previous government. David Cameron’s ‘Help to Buy’ scheme gave buyers access to 95% per cent mortgages. While this felt positive, it didn’t stop house prices spiraling further out of reach for first-time buyers who didn’t qualify for the scheme.
In 2015, Cameron attempted to revive Margaret Thatcher’s dream of giving everybody the ‘right’ to home ownership. However, the ‘Right To Buy’ scheme involved complex subsidies that landed in the pockets of private-building firms. Only one in 10 properties sold into the private sector was replaced by building contractors. The so-called “starter homes” were good investments for first-time buyers, but again, did not help the housing shortage.
‘Help to Buy’ and ‘Right to Buy’ focussed on helping people access existing stock, rather than helping supply more homes, and so prices continued to spiral upward.
A new approach to Britain’s housing crisis
The Tories’ new stance is focused on supply. May not only wants to build more affordable stock, but to create new homes across all tenure types, including rentals. Affordable rental stock is equally as important. If the new initiative is governed correctly, developers will also be prevented from drip-feeding homes onto the market (which pushes house prices up) and forced to release dwellings on to the market quicker.
Earlier this year, ministers announced that £3bn will be allocated to a new “Home building fund”, which will lend to construction companies who meet their preferred criteria. The first billion will be spent trying to build 25,500 homes by 2020. The remainder is being set aside for a long-term building project to create 200,000 more homes on publicly owned brownfield sites. Both parts of the fund will see SME housebuilders prioritised, to increase their capacity and reduce dependence on the small number of very large firms who now build the bulk of the UK’s housing stock. We also recognise the importance of this, which is why we are committed to helping small and medium-sized developers wherever we can.
The first phase of building will include 100,000 “modular homes” which are built offsite and assembled on-site. It is a less expensive method of construction, and so the homes are more affordable. Whether the owners of these modular homes will experience problems in the future remains to be seen, but the experience of other countries and assurances from manufacturers and investors point to the new crop of factory built homes being of higher quality than their predecessors.
To the future
Some very positive steps have been taken, and in the right direction. However, more needs to be done – and looking at alternative ways to increase housing stock will be essential. Until the lack of housing supply is addressed, the upward pressure on house prices will continue over the long-term. That might be good news for investors, but bad news for home seekers. The new cabinet is taking some more effective action, let’s hope there’s more to come.