With the election just over two months away, the much-discussed housing ‘crisis’ is hot on the political agenda and all parties have led with pledges focused on the housing market. Amongst them, we saw high national house building targets (from Labour and the Lib Dems), new-build discounts for young buyers to fulfil aspirations of home ownership (Conservatives) and across-the-board promises to release more land. As we wait for more detail in the election manifestos, what do these measures mean in practice?
(With acknowledgements to Knight Frank: http://content.knightfrank.com/research/367/documents/en/uk-forecast-2015-2664.pdf)
Continued bold political pledges to double house building are always going to raise eyebrows. First, successive governments throughout the 2000s have tied themselves to a 200,000+ annual figure for delivery of new homes in England alone, but this has never been delivered. Even in Great Britain, total housing starts (private, local authority and housing associations) have been below this threshold in 19 of the last 24 years; completions have only surpassed 200,000 once in this period since 1990.
Second, over the last 10 years, public housing starts have accounted for just 19% of the total on average, meaning central and local governments are setting themselves the task of influencing the other 81% – private house builders. The major house builders are operating in current conditions of rising property prices and a pipeline of demand bolstered by strengthening consumer confidence, Help to Buy and over five year’s of record-low interest rates. Even against this favourable backdrop, a survey by Knight Frank back in May 2014 found that just 6% of private sector house builders believe a target of 200,000 new homes a year is deliverable.
What is more troubling about these targets is that both DCLG and the Lyons Housing Review point out that the projected number of new households being formed each year between 2012 and 2021 averages 221,000 for England and 259,000 for Great Britain, which makes it puzzling why both Labour and UKIP have chosen a target that falls short. Furthermore, whilst the Lib Dems’ ambitious 300,000 per year target certainly achieves this basic requirement, they are open in admitting it will be a year into their prospective term before they concoct a delivery plan.
Whilst the Conservatives are the only major party to abstain from vocalising a total house building target, they do pledge 275,000 affordable homes by 2020. We also know that only 10,000 of these will be for affordable rent, suggesting that the remaining 265,000 will be built under affordable home ownership schemes. However, it is unclear whether the pledge of 100,000 homes offered at 20% discount to first-time buyers aged under 40 is being counted within or in addition to the headline affordable homes figure. Either way, that’s a minimum of 55,000 affordable homes delivered per year, a figure that has not been achieved at any point during the last five years, according to the Homes & Communities Agency (HCA) and Greater London Authority (GLA).
In order to achieve the Conservatives’ aim of increasing home ownership, it is the only party to give a firm ‘yes’ to the continuation of Help to Buy. Labour is keen to double the number of first-time buyers by 2025 and, given that over 80% of transactions under Help to Buy were for first-time buyers, it implies the scheme will need to be kept in place.
One of the most striking targets among the party announcements has been the Green Party’s aim for 500,000 homes for social rent by 2020. Social rent – traditionally considered council housing – constituted 25,000 of the affordable homes delivered in 2009/10, and dropped to less than 4,500 in 2013/14. In addition, grant funding from the HCA over the period 2015-18 prescribes construction for affordable rent, rather than social rent, as it allows housing associations a larger revenue stream to borrow against. To deliver 100,000 social rent homes per year will need significant government funding, in contrast to the two rounds of cuts to grant funding available through the Affordable Homes Programmes in place since 2008. Even at a cost of £60,000 per unit, as the leader of the Green Party states, the cost of this social housing would be £30 billion.
With all parties alert over the need to increase housing supply, garden cities appear to be the solution proposed by the Conservatives, Labour, Lib Dems and UKIP. Whilst garden cities undoubtedly give a boost on the supply side, existing concentrations of housing are around current towns and cities for a reason: jobs. Unless companies relocate, in practice it is difficult to imagine garden cities as anything other than commuter dormitories in Bicester and Ebbsfleet. At the very least, a network of transport infrastructure will be required to connect garden city dwellers to their places of work in London and Oxford.
Certainly, we should be pleased the housing sector is garnering so much political attention and it’s clear that there is going to be lots more wrangling over housing policy details as the campaign season draws closer. Let’s just hope the manifestos provide greater clarity on delivery.
By Rebecca Larkin at 25 Feb 2015, 11:11 AM