The housebuilding industry is on track to deliver the Government’s target of one million new homes by 2020, according to a new study by Savills. The challenge is to continue expanding supply in the highest-demand areas to improve affordability.
According to Energy Performance Certificate records, the number of new homes completed reached 211,000 in the year to June 2017, up 49% in three years.
Developers have increased the number of market homes they deliver by 56% over the same three-year period. Independent of Help to Buy, and excluding affordable housing delivery, the number of new homes absorbed by the market grew from around 70,000 per year between 2009 and 2015 – to 110,000 in 2017, Savills said.
However, according to the report, there remains an annual shortfall of 104,000 homes in the highest-demand areas. New entrants to the industry and new ideas are needed to deliver a range of tenures and products.
Savills outlined six factors shaping the future of new housing development, namely: affordability; funding and finance; Build to Rent; development capacity; housing for older people; and skills and materials.
Across most of the country, new housing supply is almost meeting demand, particularly where housing affordability is better than average. But in higher-demand areas in the south east of England, an increase in supply is still needed to ease affordability pressures, the report warned.
In places with less stretched housing affordability, there was a shortfall of only 5,000 new homes. But in places where demand is high and affordability is stretched, there was a shortfall of 104,000 homes.
Savills said that the UK needs a new catalyst if it is to build the 300,000 homes per year that are required in England to ease affordability pressures for home buyers. There problem is that there isn’t enough land being released for new housing development in the highest-demand areas.
Much more land must be released in high-demand areas to reduce competition, lower land values, and enable new homes to be sold at levels the mass market can afford, the report said. It needs to be recognised this will limit the capacity for sales proceeds to fund infrastructure and affordable housing via S106 and CIL.
The standardised approach to calculating housing need recently published by the government is a step in the right direction towards delivering homes where they are most needed and supporting economic growth, Savills said. However, it also demonstrates how great the challenge is to deliver the required number of homes. In the most unaffordable locations, housing delivery needs to more than double to meet need.
“For the Housing White Paper to fix the housing market, the government must take the problem of undersupply in the south east seriously,” the report concluded. “There needs to be a regional market-led strategy for land release, including a programme of green belt swaps.”