Michael Holmes, property expert and spokesperson for The Northern Homebuilding & Renovating Show, comments on why the UK housing market is broken – and what can be done about it.
The cause of the housing crisis in the UK is simple enough for any GCSE economics student to understand: there are too many people chasing too few homes to either buy or rent.
The reason behind this is twofold: regional policy has failed to prevent employment and wealth from clustering around Greater London and the South East of England, and we have built far too few new homes for generations.
The solution is equally obvious: we need to improve transport and infrastructure and create employment where housing is currently most affordable – which it is across much of the UK, and build more homes where people want and need to live.
The latter can only be achieved by granting planning permission for more sites in more locations – and that’s where the problem lies. Almost everyone seems to recognise the need to build more homes for future generations, but also holds the contradictory thought that they should be built anywhere else other than where they live.
This is an unsustainable position. It is also creating a generation that has no choice but to rent, creating a divided society that is deeply corrosive. It is also slowly killing communities, especially in the Green Belt and open country, turning small villages in highly sought after areas into dormitory or retirement settlements, where no one under fifty can afford to live.
Ironically, the same people who campaign to prevent new homes are often the very same people who decry the loss of the post office, local shop, school and community facilities.
Only when we accept that no settlement is too small or too special to sustain at least some sort of level of expansion, even if it is one new home every twenty years, will things change.
If this approach were put in place through policy, and communities challenged to decide at local level, how and where they want the new housing that is needed, it would help to diffuse the currently insurmountable local opposition to almost all housebuilding and lead to a constructive dialogue about what should be built and for whom.
More small sites, where people actually want to live, will always find buyers and can be delivered. Small sites will open up the market to small and medium size housebuilders and those who want to build their own home.
Small and medium size housebuilders used to build more than half of all new homes but now deliver a fraction of this, largely because they cannot access the land market. In most developed economies, an average of 30% of new homes are commissioned by their owners, but currently in the UK this figure is just 8%.
The recently introduced Right to Build legislation in England is intended to open up the land market to those who want to build their own home. It requires local authorities to assess demand through registers (righttobuildportal.org.uk) and places a duty on them to grant planning permission for enough serviced plots to meet that demand.
This means local authorities must facilitate the creation of sites for new homes that are shovel ready, with road access, electricity, water, gas, high speed broadband all in place or ready nearby. They can do this be working with landowners and developers through planning policy, by utilising public sector land, or by buying land and engaging in placemaking – capturing a share of the planning gain and generating much needed revenue in the process.
Significantly, these sites need not just be small and single plots, they can form part of a larger strategic housing site. The serviced plots market can open up large sites that could otherwise take decades to deliver, to new markets, accelerating the delivery of new homes.
Speculative volume house builders build at a long-term average rate of around 2.6 sales per month per site outside London. The only way to build out these sites faster currently, is to subdivide them and bring in another volume housebuilder, who can each sell another 2.6 homes a month.
Research by the Home Builders Federation (HBF) finds that 33% of the public would consider buying new home from their members. The National Custom and Self Build Association (NaCSBA) believes that some of the other 67% of housebuyers would also consider buying a new home if there was more choice, ranging from simple upgrades to a blank canvass to create something unique, and everything in between.
The UK Government is committed to solving the housing crisis and acknowledges the need to build more homes, and is very supportive of the custom and self build market, which it has pledged to grow to 20,000 homes a year by 2020. It has ambitions to take this much further to 50-60,000 homes a year by 2030, or 20% of new homes, more in line with Europe, the US, Canada Japan and Australia.
Housing is one of the very few consumer markets in the UK where there is limited choice and too little competition.
Transforming the market for building land, so there is access for new challengers alongside the volume housebuilders, SME housebuilders, custom home developers, self builders, affordable housing providers (including community led housing) and the institutional private rental sector, will allow the UK housing sector to function more like a normal healthy market, in which supply can rise to meet demand, and consumer choice and competition can drive quality, innovation, and above all else, affordability.