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Is now the time for a long-term housing policy?


As the UK’s chronic property shortage shows little sign of abating, are we finally about to see a coherent long-term housing policy?

Across the industry and in wider society there is a consensus that the UK is building too few homes. There is less agreement, however, about the best way to tackle the problem so that both short- and long-term demand can be met.

As local councils battle with a full-blown housing crisis, one thing is clear: frustration is growing at the regular sight of hard-hatted politicians posing for photos on building sites while the number of new homes continues to lag far behind demand.

Such has been the concern that, in late October 2015, Labour MP John Healey commissioned the Redfern Review into the Decline of Home Ownership. The review was led by Taylor Wimpey chief executive Pete Redfern and the resulting report was published earlier this month. Perhaps its most significant recommendation is for the creation of an independent housing commission.

So, will Redfern achieve what successive governments have failed to accomplish? Will it trigger the creation of a meaningful long-term housing strategy and, most importantly, the delivery of sufficient numbers of new houses to meet the UK’s ever-increasing demand?

Number theory

When former housing minister Brandon Lewis pledged in 2015 to build one million homes by 2020, the announcement sparked positive headlines. But this amounted to just 200,000 homes annually over five years and many experts deemed the figure a long way short of what was needed.

In recent months, ministers have committed £5bn to boost house construction, but it has since been found – as is often the case – that some of this cash had been pledged already and was merely being re-announced.

According to Redfern, UK homeownership has fallen from a peak of 70.9 per cent in 2003 to 63.6 per cent in 2014/15. Figures from the Department for Communities & Local Government also indicate poor performance in the delivery of affordable homes. Only 32,110 were built in England in 2015/16 – half of the previous year’s figure and the lowest total for a decade.

Several years of insufficient new-build developments have resulted in a chronic under-supply. The Homebuilders Federation says 220,000–250,000 new homes are needed each year; housing charity Shelter puts the figure at 250,000; and a report published earlier this year by the House of Lords economic affairs committee went further still and argued that the Government’s target should be increased by 50 per cent, to 300,000 new homes a year.

For those with a long-term interest in the fate of the housing sector, a major source of grievance is the frequency of ministerial change in recent years; there have been six housing ministers since 2010. A recent survey by the Inter­mediary Mortgage Lenders Association found that three-fifths of mortgage lenders thought the housing minister ‘merry-go-round’ had contributed to the lack of a cohesive housing policy.

Redfern Review

This view is echoed by the Redfern Review, whose proposal for an independent housing commission was prompted chiefly by the observation that short-termist, election-driven strategies inevitably made it difficult to work towards long-term housing goals.

The review says: “Increased new supply does not directly improve the homeownership rate. It will have a suppressing impact on house prices (and thus affordability) but it is a slow, cumulative process. There therefore needs to be a change in attitude towards supply.

“We don’t doubt that politicians – local and national – and the broader public accept the need for increased supply, but there needs to  be an approach based on how to effectively deliver the results we all want, regardless of short-term politics.”

It goes on: “What is needed is decades of consistent supply improvements, in both quantum and particularly location. That can only be achieved with a long-term plan, with principles agreed by all main political parties and where any short-term decisions are taken in line with the principles and that plan.

“We can significantly improve supply where it is needed, in the long term, in a sustainable way, but only if we adopt a long-term, principle-driven approach. This must include a stable and supportive environment for all main housing tenures.

“Supply can make the difference. However, it is supply over the very long term. Therefore, policy suggestions on this should be weighted towards long-term strategy and cross-party and independent support for sustainable policies. Short-termism is the biggest problem to deal with in policy setting.”

While cross-party co-operation on long-term strategy – beyond 20 years – would enable developers to invest confidently in larger projects and infrastructure, Redfern says such support is also required for 10- and 20-year housing targets, including new settlements, urban extensions and investment in affordable housing.

When the report was published, there was widespread support among industry commentators for the idea of an independent housing commission. However, one aspect of the review drew criticism.

Aldermore group managing director for mortgages Charles Haresnape believes the report  underplays the role that the lack of supply has played in the housing crisis. He says: “Where the Redfern Review pinpoints the start of the house-price boom in 1996, it is notable that, in the six years leading to the boom, annual housebuilding numbers fell by almost 25 per cent, down from 242,360 a year in 1989.

“To diminish the impact that decades of housing undersupply have had on prices, and on a market where our own research has found that almost a quarter of respondents were not planning to ever own a house, is to bypass the major issue most see in the industry. If there are no ‘short-term’ solutions to the undersupply of housing, it is because the problem of underconstruction has not been caused over the short term.”

The Redfern Review made some suggestions that it said were not firm recommendations but options intended to stimulate debate. It proposed:

  • A refocusing of Help to Buy to target the scheme more exclusively at first-time buyers and at lower price points on a regional basis, extending the term beyond 2021 for this restricted group
  • Starter homes should be retained but only on designated ‘exception sites’ and with the first-time buyer discount retained in perpetuity
  • More support should be given to programmes that promote savings among young people
  • The maximum scale of Lifetime Isas should be increased and consideration given to increasing the level of government contribution
  • The ‘one for one’ replacement policy for Right to Buy should be extended so that all council homes sold through the scheme are replaced
  • Rental conditions for tenants should be improved while avoiding increasing landlords’ costs unnecessarily.

Beyond Redfern

The Redfern Review is not the only source of ideas for solving the housing crisis, however. The report by the House of Lords economic affairs committee, which called for a 50 per cent uplift in the annual target for new homes, made other key recommendations.

The committee was heavily critical of the current structure of the housebuilding sector. It said: “The Government’s reliance on private developers to meet its target of new homes is misguided.

“The private-sector housebuilding market is oligopolistic, with the eight largest builders building 50 per cent of new homes. Their business model is to restrict the volume of housebuilding to maximise their profit margin.”

To address this, the Lords recommended that local authorities be granted the power to levy council tax on developments that were not completed within a set period.

In addition, the committee proposed permitting local authorities to borrow to fund social housebuilding, as for other building programmes. It argued this would enable them to resume their historical role as a major builder of new homes, particularly social housing.

It said: “The current historically low cost of borrowing means local authorities could make a large contribution to building the houses we need for the future. Further, the Government [is to] abandon its fiscal target. This paves the way to increase local authority borrowing powers.”

The committee called on the Government to take decisive steps to build on the “very substantial holdings” of surplus publicly owned land. It recommended that a senior cabinet minister be given responsibility for identifying and co-ordinating the release of public land for housing, with a particular focus on providing low-cost homes.

It also proposed that local authorities should be able to set and vary planning fees to help fund a more efficient planning system, and said the upper cap on these charges should be much higher than the current limit.

For Legal & General Mortgage Club director Jeremy Duncombe, part of the problem with UK housing policy is that it tends to focus on the goal of homeownership rather than on the wider aim of providing good accommodation for all sectors of the market.

He says: “We need to build more houses across all tenures, not just homes for purchase. The market also needs more social housing and retirement homes, which will encourage older borrowers to downsize and free up the larger family properties that are currently lacking. We also need a focus on the necessary infrastructure that accompanies new homes, such as new roads and schools. Change needs to happen now.”

Right mix

Mortgage Advice Bureau new homes relationship manager James Chidgey says it is crucial to get the right mix of participants in the housebuilding sector. This also means ensuring that finance is available to support different types of construction, as well as land to build on, of course.

He says: “While new-build numbers are up, we still need to build more homes. And, although there is wide recognition of this within both the new-build sector and the Government, there are challenges to overcome in order to achieve some meaningful numbers.

“We need to look at ways of supporting builders of all sizes to enable a sustained level of supply, and ways of breaking down the barriers that delay or restrict the housebuilding process.

“One area that continues to be an issue, for builders of all scale, is the availability of land. It is essential that we start freeing up more land that builders can competitively bid for. Planning remains a lengthy process and there is still some work to be done in order to ensure that the right land is available for the right projects.”

Chidgey adds: “Consumers want more inv­olvement with the product being built and it is predicted that the emerging custom-build market, which has significant government support, could deliver 30,000 units over the next five years. Local authorities could consider using custom build on smaller pockets of land, which in turn could encourage the much-needed SME builders back into the market.

“As custom-build mortgages are typically stage payment mortgages, this will further aid the SME to cashflow projects and potentially make the build more affordable for the end consumer. It is important that, while we continue to support large developers to generate volume build, we also enable SMEs to complement these numbers.”

With a government white paper on housing due for imminent publication, property pundits are relieved that the sector is at last gaining prominence on the political agenda.

However, whether this focus will continue into 2017 and result in a cohesive long-term housing strategy may depend on other factors vying for cabinet ministers’ attention – notably, Brexit negotiations and Article 50.


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