This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
With demand consistently outstripping new supply, the housing problem is one that worsens over time. More people are gravitating to London and the South East, which puts a strain on the area’s housing stock. London’s population hit a record high of 8.6 million this January and is expected to reach 10 million by 2030. The number of overseas non-residents buying London property also keeps increasing. Frequently, they’re drawn in by the global reputation of London’s property market as a safe haven in which to invest, but in so doing they help drive up the cost of properties and exacerbate the shortage.
Furthermore, we have developed a culture of home ownership, a trend showing little signs of abating. Countries such as Germany and France enjoy a much higher proportion of long-term renters. The Government’s philosophy is one of encouraging home ownership, so naturally many of its policies follow that: for instance, extending Right to Buy to housing association homes, expanding the number of proposed housing zones and introducing Help to Buy ISAs.
The flip side of the equation is that we aren’t constructing enough to meet demand. 240,000 new homes are required each year but we haven’t built at that level since the 1930s. The Government has recognised that obtaining planning permission and bureaucracy have been particular hindrances for major housebuilders. That’s improving and there are further plans to streamline the planning process, including through the extension of permitted development rights and granting elected mayors tough powers over planning.
Councils are also no longer building at the levels seen in the post-war years and, unfortunately, that slack isn’t being adequately taken up by housing associations or the private sector for various reasons. In a change made by the Government’s Budget earlier this month, higher earning council and housing association tenants can now be charged up to market rent but it’s disappointing that this extra income will go to the Exchequer rather than towards new housing.
A key factor is the shortage of suitable land. We know that building on the green belt is considered political dynamite but when the country was last developing at the required levels all those decades ago, that didn’t exist. Efforts are being made to repurpose brownfield sites for residential use, with 150,000 homes to be built on land currently owned by the Government within the next five years.
It’s also important to contrast the private and public housing sectors. In the current market, where the price of houses is generally rising year on year, it may actually make sense for large private housebuilders, who dominate the sector, not to build too quickly – since a delay may mean the completed dwellings can sell for more. This can encourage landbanking, where useable development land is simply parked for future development.
With public housing, the requirements are different. Social and intermediate housing must be affordable and, in a booming market such as ours, quick delivery is needed to minimise the effects of inflation on construction costs.
