Housebuilders’ new challenge is affordability

The number of cranes needling the UK’s major cities should put paid to the myth that Britain isn’t building. According to new research by Savills, housebuilders are on target to deliver one million new homes by 2020. However, unless these homes are delivered in the right places, Britain will continue to face an affordability crisis.

The most recent data highlights 189,650 additional dwellings were built in 2015/16, the Construction Products Association (CPA) noted recently. This means that house building does not need to significantly increase to meet the government’s ambition. However, demand continues to outstrip supply, and attention has turned to affordability: housing is less affordable for a first-time buyer now than it was in the 1990s.

Housebuilders are also racing a growing population. Conveyancing services provider Search Acumen found that a deficit of more than 500,000 homes has formed in England, compared to the number of new households created. The research suggested that there is enough brownfield land to give the space to meet housing demand, while Savills echoes the need to release more Green Belt land for development.

“While it’s good news that there is enough brownfield and green belt land to accommodate new builds to meet the housing shortage, it is important to take into consideration the reasons these plots of land haven’t been contemplated before,” said Steve Mansour, CEO of CRL. “For some builders, it can be difficult to raise the necessary finance to fund such a project and these developments must be commercially viable.

“It can also be more complex for developers to plan and build on these pockets of land, especially when considering potential resistance from existing residents or the quality of land on offer, so more detailed research does need to be done to look at how viable these options will actually be. It is also important to take into account that basic, affordable family homes do not offer the highest return on investment, and ultimately, these are the types of houses that need to be built to address the shortfall.”

The CPA therefore recently wrote to Chancellor Phillip Hammond urging him to reaffirm the government’s commitment to the Help to Buy scheme.

“The Association suggests that a commitment from government to the Help to Buy equity loan beyond 2020/21 would offer much needed certainty for the sector’s strategic planning to meet the housebuilding targets,” said Dr Diana Montgomery, Chief Executive of the Construction Products Association. “To prepare for the eventual withdrawal of the scheme, some tapering would be appropriate, such as restricting eligibility to first-time buyers or the imposition of an earnings cap in line with shared ownership products.”

While the government has thrown another £2 billion at affordable housing schemes, how this will translate in the market remains unclear. “The Conservatives have twigged that help to buy and private developers can never solve the real housing crisis – the lack of affordable rented housing,” said Robert Desbruslais, Director, Desbruslais Chartered Surveyors.

“Developers are hamstrung by profit margin and can only build a small percentage of affordable homes in any given scheme.

“Help to Buy merely assists the minority with sufficient income to get a mortgage, and could also be described as ‘help the developers profit’…. It is also questionable if first time buyers get value by being encouraged to buy new build which loses value the moment it is sold, a dangerous scenario when house prices are not rising.

“So, we return to Council Housing Development with a £2bn investment pledge; a good start, but still a drop in the ocean.  It is such a shame all those lovely council houses built in the 1950s were sold off cheaply during the ‘Right to Buy’ push in the Thatcher era. At least this time around there will be no repeat of the 1960’s high-rise damp ridden concrete monoliths.

“Let’s hope a future government avoids the temptation to sell them all off again.”

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