- Goal of 300,000 new homes a year further away than ever, says Barker
- The original report made 36 recommendations, only 11 have been fully implemented
Amid all the evidence of a housing crisis, the UK is only getting further from catching up: the value of new housing projects moving on site in the first quarter was 28 per cent lower than the same period last year, dragged down by a lack of new starts, according to data provider Glenigan.
Private housing projects fell by around a quarter, and social housing starts were down 40 per cent. The prior-year period was also weak, with starts down in value by 12 per cent on the first quarter of 2022.
The lack of new homes being built places further pressure on the UK’s housing stock. In 2022-23, there were 1.29mn households on local authority waiting lists for social housing. Although housing affordability ratios have eased from their 2021 nadir, they are still incredibly stretched.
The median house price in England and Wales costs eight times the average salary. In London, that ratio stands at 12 times.
The Home Builders Federation (HBF), the trade body representing housebuilders, lays the blame for this on the country’s politicians and their meddling in a planning system that has slowed to a crawl.
It recently published a paper looking at the failings of the market in the 20 years since Dame Kate Barker published an influential report for the Treasury aimed at fixing the issue. It had made a range of recommendations aimed at slowing house price inflation in England, which had been running at 2.7 per cent over the previous 30 years. To get this down to 1.8 per cent, a 50 per cent increase in supply was needed – growing from a baseline of around 160,000 homes to 240,000 a year. A more ambitious scenario to bring house price inflation down to the EU average rate of 1.1 per cent required an extra 140,000 homes, bringing the total to 300,000 – the target the current administration set in its 2019 manifesto.
On average, 190,000 net new homes a year have arrived on the market – more than a third below target. Supply has increased, with 234,000 net added in 2022-23, but this "falls far short", the HBF said, given weaker additions in previous years.
In a foreword to the HBF’s report published earlier this month, Barker said the prospect of 300,000 new homes being built each year in the UK “seems as far off today as it did in 2004”.
Her original report made 36 recommendations for boosting housing supply, but only 11 of these have been fully implemented, with a further 10 partially implemented. Five more were put in place but have since been reversed, the HBF said. Amendments made to the National Planning Policy Framework by Levelling Up secretary Michael Gove in December “further weaken obligations on local authorities to ensure the delivery of new housing”, the HBF’s report said.
The planning environment has worsened. In 2012, more than 60 per cent of major planning applications were decided on within 13 weeks. By last year, that figure had fallen to just 20 per cent, according to CBRE.
But planning isn’t solely to blame. The Joseph Rowntree Foundation (JRF), a poverty-focused charity that started out building social housing in the 19th century, argues housebuilders themselves exacerbate shortages by slowing starts during downturns or building in cheaper areas to avoid selling at lower prices – a view that was upheld by the Competition and Markets Authority’s recent study into the sector.
There is no shortage of opinion in terms of how to fix things.
A new report on London’s housing shortage by campaign group Britain Remade suggests London adopts a similar measure to the one introduced in New Zealand’s biggest city, Auckland, whereby schemes of up to six storeys that are within walking distance of city centres, commercial and transport hubs gain automatic approval. It also called for better use of land, including swapping low-density industrial land sites near transport hubs for other sites with better access to road networks. Perhaps most controversially, it also proposes building on some of London’s 95 golf courses – 40 per cent of which are publicly owned, with a combined land area bigger than Hammersmith and Fulham.
CBRE also proposes easing restrictions on building on some of England’s 1.6mn hectares of designated greenbelt land, covering 13 per cent of the country. Some of this is poor quality land with “little inherent ecological value”, it argued. Almost 1.7mn homes could be built on sites in outer London in areas already considered to be developed, the consultancy said.
The JRF thinks that housebuilders will be unwilling to step up activity until house prices improve, as they have stronger balance sheets when compared with the aftermath of the 2008 global financial crisis and are not short of cash. Their curb on activity leads to “job losses and weakness in the construction supply chain”, it argued.
Yet the uplift in housebuilders’ share prices that has taken place over the past six months suggests investors think a recovery isn’t far away. Although profits are expected to remain under pressure this year “as volumes remain subdued and pricing flat at best”, conditions are expected to look much better in the second half of the year, said Investec analyst Aynsley Lammy.
The sector now trades on a 10 per cent premium to book value, which may look full when compared with last year, but “appears undemanding assuming that trading conditions, boosted by interest rate cuts, gradually improve from here”, he added.
