John Scally is head of product development at Leeds Building Society
Homeownership and addressing the issue of affordability has been high on the agenda of political leaders since the 1920s. The cynic may hypothesise a correlation between effective home ownership solutions and the likelihood of re-election success, but the issues are multi-faceted and other political pressures can readily come to the fore. Public interest continues to put any housing white paper at the top of the political agenda.
Most recently David Cameron’s government set out a clear commitment to accelerate supply and build more affordable homes, one million during the term of the Parliament.
However, despite favorable housing policy and an economic upturn, aspirations remain significantly misaligned to reality. Developers have made strides to increase production, with further capacity enhancements in the pipeline, but owner occupation between the ages of 25 to 35 is falling and social housing waiting lists continue to grow. Latest estimates suggest we’re around a million homes short of what’s needed and current run rates continue to under-deliver.
The scene is set with a new government and a new Housing White Paper in January – expectations are high…
So what can we expect from a government which promised to “set out a coherent strategy for how we can get this country building”?
Rhetoric suggests the overarching vison of a million new homes in this Parliament is likely to be retained. However, creating a market that “works for everyone” requires a fundamental change in approach.
Gavin Barwell was quoted that he “wants to see more of everything” – more new-built homes on the open market, more private rental sector homes, more shared ownership, and more homes at sub-market rent. So we should anticipate a broad range of measures intended to meet the country’s needs across all tenures, unlock resource, widen delivery and speed up supply.
The government’s recently-announced £5bn funding to support its housing ambitions, of which £3bn is for homebuilding (homebuilding fund) and £2bn to unlock public land (accelerated construction fund) provides some insight into how it intends to fulfil its aims.
However, delivery is not solely dependent on funding so policy measures are likely to focus on support for SME developers, custom-builders and those using modern methods of construction. Equally, we can expect a reduction of “post-planning red tape”, to improve pace of delivery through swift granting of planning permission and minimising time between approval and build. The economics of build and sell-on far outweigh any incentive to landbank but the process has to play a supporting role.
Communities secretary Sajid Javid promised “significant” new measures in this respect to “do better” and commited to “make the right decisions, not the easy ones”.
With an increase in affordable housing described as “a moral imperative”, we can expect sustained attention for this vital sector. The aspiration of 200,000 starter homes by 2020 was a major manifesto commitment, and the Conservatives’ flagship proposition to deliver affordable housing. The White Paper is expected to set out next steps for this scheme, while recognising no homes have been delivered to date and what was a stretching goal with five years to deliver is now improbable with only three remaining.
Whilst some schemes generate more hot air than housing, shared ownership, which has been established for over 30 years, continues to have a material impact, with many families reaping the benefits of this tenure. For this reason alone we should expect shared ownership to remain high on the government’s agenda but success necessitates private developers engage alongside registered social landlords. That’s simple in theory but consumers need the same protection afforded by housing associations if private shared ownership is to make a difference and help bridge the shortfall. Lenders will continue to shy away from schemes which leave the consumer exposed to unnecessary conduct risk.
For this reason the current objective of 135,000 homes by 2021, for which a funding round was conducted in the summer, is already a significant challenge. Applications demonstrate demand but practical solutions are needed if private shared ownership can deliver homes consumers can borrow against with confidence and security.
That said, there should be no doubt this type of tenure provides a solution for key issues encountered by many aspiring to buy their own homes today, namely affordability and size of deposit. Given the attractiveness of the scheme in both respects we may see a desire for more.
Recognising a healthy housing market requires a broad range of options to meet the needs of all, we can expect to see more announcements to support PRS, including encouraging institutional investment, which fits with a clear desire to develop a well-operated, more professional market.
We’ve also seen the government’s recent interest in a “buy as you go” scheme, put together by the National Housing Federation. More details are expected soon but we know this proposal would offer sub-market rent combined with the long-term opportunity to own. It’s unknown whether the pending White Paper will support similar initiatives.
Private rent isn’t the only non-ownership tenure and we can expect to see social housing provision bolstered, a move which would have wide cross-party appeal.
In summary, the government appears to be taking a pragmatic approach to tenure-neutral housing and tackling issues which have slowed delivery. The rhetoric to date suggests these positive moves are likely to be welcomed by developers, consumers and lenders alike but, with so many schemes already available and more expected, the government needs to ensure policies are complementary to facilitate incremental home ownership rather than risk cannibalising existing, well-established and effective solutions.