As the number of people using the Help to Buy scheme continues to grow year-on-year, how can we satisfy demand for new housing?
The demise of the British high street is becoming increasingly prominent as the e-commerce industry booms. Last year alone, PwC reported that 1,772 shops disappeared from Britain’s town centres, as record numbers of customers opted to do their shopping online – equating to almost five store closures each day.
A lack of stock of suitable properties on the market and continued stretched affordability for businesses means there are hundreds of thousands of empty square metres that could be put to better use as high-quality affordable homes.
One step forward
This was recently acknowledged by the chancellor in his autumn Budget. As part of his £1.5bn injection to help the UK’s struggling high streets, Philip Hammond announced a £675m fund to help councils transform their main retail areas, part of which could be spent on turning unoccupied high street shops or commercial buildings into new homes. By making use of this empty shop space, it is estimated that between 300,000 and 400,000 new homes could be created.
It is not just property for sale that this commercial space could be turned into – it could also be used for shared ownership or affordable rent schemes, helping first-time buyers and others.
Not as simple as it seems
However, there are several factors that must be taken into consideration, such as demand in the area, local amenities and transport links, pricing and construction type. From a surveying perspective, we see a huge variance in the quality of office-to-residential conversions.
Brought about by changes to planning rules on permitted developments in the last few years, this has fed the market with variable standards. Office blocks were not built with residential occupation in mind and need to be modified to make them suitable, generating variability in what architects are able to do.
Similarly, many of these office blocks are in peripheral areas, next to retail parks, or even above supermarkets, meaning that access to both the building and to local transport can be a challenge. If we are to bring demand to such areas, then we’ve got to plan strategically to ensure that both the local area and infrastructure is developing at the same time.
From a buyer and broker view, there is uncertainty about what is and what isn’t suitable for different mortgages. Typically, major retail lenders will not take residential owner occupier mortgage applicants in blocks dominated by investor-only demand. This provides an opportunity for service desks to show their true worth, offering lenders upfront advice to understand lenders’ risk appetite in this space.
Converting the high street is most certainly part of the solution, but on its own it is not enough to fix the housing crisis. While it is encouraging to see new build completions up 6.4 per cent on last year, according to government figures, if we are to meet the target of 300,000 homes per year, we need to look further afield for alternative methods to deliver new homes and ways to finance them.
From self build and custom build, to modular construction, there are other feasible options out there that can enable us to deliver more high-quality homes at a higher capacity than traditional developments.
It is not just the supply that we need to increase. Schemes such as Help to Buy and shared ownership have played a significant role on the demand side, offering first-time buyers the opportunity to take their first steps on to the housing ladder, but where will we stand when the Help to Buy scheme ends in 2023?
As an industry, we need to work together to find long-term solutions to the current affordability challenges and ensure first-time buyers and borrowers with Help to Buy loans remain supported. The issue of raising a deposit for borrowers hasn’t gone away and as a result we’re still heavily reliant on the Bank of Mum and Dad, which an L&G study shows accounts for one in every four housing transactions.
Whether it is through a discounted market scheme, encouraging uptake in shared ownership, or higher LTV mortgages, it is only by harnessing opportunities and innovations that we will be able to give everyone access to high-quality affordable homes.
By Craig Hall, head of broker relations, Legal & General Mortgage Club, and James Ginley, technical director, Legal & General Surveying Services