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A moment of Clarity

The future of residential property

Theresa May promised the Tory conference she would dedicate her premiership to fixing the UK’s housing problem, and the Communities Secretary Sajid Javid has now taken up the baton.

It reflects a growing consensus among politicians that the scale of the crisis demands action. Promises to build more housing have come from a succession of ministers in all governments, says Jeremy Raj, Head of Residential Property London. “Housing comes to the top of the political and media agenda regularly, but generally real change has not followed.”

But he adds: “There are increasing signs that government is prepared to make fundamental concessions to previous dogma by loosening borrowing rules and investing significantly in trying to achieve growth in housing numbers.” The diagnosis is serious. Over the past 40 years the cost of the average home has rocketed from three times average wages to nearly 10 times. For the first time ever, home ownership rates are falling. The figures suggest that home ownership is slipping out of reach of the majority of young people, with the situation in London chronic, and that the current rate of housebuilding needs to double – just to keep prices at their current unaffordable levels.

The UK’s housing shortfall for its current population is one million homes, according to Policy Exchange. Construction levels have fallen since 2011 from 50,000 a year to 41,000, when estimates of need range from 100,000 a year to 240,000.

While the question of ‘landbanking’ is controversial, last year’s housing white paper beefed up council powers to make developers ’use or lose‘ planning permission.

Small builders have been squeezed out by the costs of capital and of planning, building only one home in eight last year, according to the Home Builders Federation, compared with 40per cent in 1988. Many of them struggle to deal with the complexity and cost of the planning regime and the plethora of other regulations.

Local authorities complain that their budgets have been slashed by over 40 per cent since 2010, hampering their ability to invest, while builders say planning reforms have not gone far enough and create blockages in the system. At her conference, the Prime Minister promised an extra £2billion for the £7 billion social housing budget, or 5,000 new homes a year over the next five years – a modest ambition. But later that month the Prime Minister staged a summit of housebuilders and local government at Downing Street.

Jeremy Raj says: “We seem to be heading towards a genuine acknowledgement from the present government that the financial restrictions and disincentives placed on local authorities and housing associations mean that targets for new stock are unlikely to be met unless there is genuine new thinking, a relaxation of those restrictions, and possibly also repeal of the Right to Buy legislation.”

The Grenfell tower disaster also focused attention on shortcomings in national and local policy.

Jeremy adds: “In the wake of Grenfell, the housing industry as well as the public sector is nervous about the collective failure to co-ordinate between different sectors.

“The solution to the ‘broken housing market’ must involve a mixed contribution – i.e. private and public sector, with incentives for both, and a fundamental reappraisal of where we go from here.”

Critics say that current tax incentives do little to help, citing the government’s Help to Buy giveaway which is said to drive up property prices by merely stimulating demand. It is also proving ineffective in London, where only one in ten first-time buyers are using the scheme against one in three for the UK as a whole.

Jeremy says the government “needs to be able to point to some good news or positive outcomes” beyond this, and that the political momentum has to be maintained. “The chancellor has to pull some rabbits out of the hat with his next budget.”

Published: 25 October 2017

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