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Housing the nation - Managing the housing crisis

Rachel Potter

Not enough houses are being built and it's placing Britain in a housing crisis, says Rachel Potter

Britain is in the middle of a housing crisis. Central government, local government and the construction industry agree that too few homes have been built over the past two decades.

Census data shows that house-building fell by 4% between 2001 and 2011, while the number of people renting from private landlords rose from 9% to 15%. If the trend continues, demand for housing will outstrip supply by 750,000 homes by 2025, according to the think tank the Institute for Public Policy Research (IPPR).

This pressure on housing means rising rents and rising house prices. On top of that, the charity Shelter estimates that 7.4 million homes in England fail to meet the Government’s decent homes standard. So how can we reverse the trend and ensure that supply outstrips demand?

According to IPPR research, 96% of people believe Britain has a serious housing problem. Anna Turley, lead researcher on housing policy, says finance is the biggest barrier to house building. The IPPR’s ideas for new sources of finance include a national investment bank to inject capital into construction, and asking the Government to allocate a further £750 million to housing capital expenditure each year.

Turley says: “The biggest impact could be made by shifting public money from subsidising rents (£95 billion in 2011-14) to building new homes (just £5 billion) through a localised housing grant which gives councils greater freedom to borrow and invest.” This would allow councils to shift spending from rent subsidy to capital by making more properties available, putting downward pressure on local rents.

The Local Government Association (LGA) agrees on the need for greater freedom and flexibility. Councillor Mike Jones, chairman of its environment and housing board, says that as housing issues vary from area to area, councils need the flexibility to tailor solutions to local circumstances.

Living in an affordable, decent quality home is becoming a pipe dream for an increasing number of people. What we need from the Government is direct investment in building new houses, which would help make things more affordable for everyone

“To get Britain building again we need to address the lack of liquidity in the finance market and tackle the shortage of mortgages for struggling first-time buyers,” says Jones. Councils are working with developers to provide more new homes, but there is potential for them to do much more. “If, for example, Government scrapped the cap it has placed on the amount councils can borrow to invest in housing, councils could build up to 60,000 homes and invest more in bringing existing properties up to scratch.”

On the construction side, firms are desperate to get building. Smaller house builders have been particularly affected by the economic downturn, says the Federation of Master Builders (FMB). In the first three months of 2013, only 16% of its members reported an increase in private new housing workloads. Just 6% reported any increase in new social housing activity.

FMB members would like to see a reduction in the regulatory burden on house builders, which has had disproportionate cost implications for small-volume sites. Its recommendations include:

  • improved access to development and mortgage finance for smaller house builders and their customers
  • requirements on councils to identify a certain percentage of sites for 50 units or less in their local plans
  • a reduction in planning fees and information requirements.

Anecdotal evidence suggests that a previous tier of regional house builders has all but disappeared, says an FMB spokeswoman. Large numbers of smaller builders have stopped building housing and moved into other areas. “A desperate shortage of finance, the restricted supply of small sites and an increasing regulatory burden are the key factors driving this decline.”

The Government says it is committed to helping councils, developers and communities increase house building through measures including:

  • simplifying and speeding up the planning process
  • a £570 million ‘Get Britain Building’ investment fund for developers
  • identifying surplus public sector land to support up to 100,000 new homes
  • the ‘New Homes Bonus’, a grant to councils for increasing the number of homes 
  • loan guarantees for housing developers.

Grainia Long, chief executive at the Chartered Institute of Housing, says that the Government does now appear to understand the economic impact of housing. “However, the bottom line is something fundamentally needs to change; we need to start doing housing completely differently.” 

Long has called on the Government to raise borrowing caps for councils, make changes to stamp duty and look at ways of allowing borrowing against future tax receipts to fund new homes.

“Living in an affordable, decent quality home is becoming a pipe dream for an increasing number of people. What we need from the Government is direct investment in building new houses, which would help make things more affordable for everyone.”

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