If you build it (affordably), they will come – the answer to the UK’s housing crisis?

This article was co-authored by Samina Entwistle, Trainee Solicitor, Manchester.

Homelessness, housing benefit spend, the cost of the private rental market and the average price of houses are all at an all-time high. The number of people able to buy their own home, conversely, is at an all-time low. It is not difficult therefore to see why many have concluded that that there is a housing crisis in the UK.

Two reasons are often cited as key contributors to this. The first is the physical shortage of homes compared to the number of households and the second is the fact people are unable to pay rent and simultaneously buy a property.

To tackle these issues, on 24 October 2018, Richard Bacon MP introduced the Housing Reform Bill. The day after, members of the House of Lords, including a vice-president of the Town and Country Planning Association and the chair of the National Housing Federation, debated government policy on affordable housing.

Background

The average couple in the UK’s private rented sector spend half to one third of their salary on rent. Although rents in the private rental market have been slower to increase than salaries, inflation and living costs, most people nevertheless believe that rent is too high. More people are finding it hard to buy their own home, with the average house costing almost eight times average annual earnings. The situation is worse for those under 35, and it is no wonder that house ownership for 25-34 year olds has fallen from 60% to 37% in the last 10 years.

The UK population, more than that of most other countries, has a propensity for ownership over renting and it is suggested that 86% of the population would like to own their own home. Despite this, home ownership is falling and 74% of the government housing budget now goes on housing benefit.

Clearly, there is a desire to own, and arguably, a clear fiscal incentive for the government to support ownership as it will reduce the housing benefit bill.

Solutions

Government budget

The government confirmed in its 2018 autumn budget that it is planning to:

  1. Provide help-to-buy schemes, and cut stamp duty, for first-time buyers.
  2. Encourage participation in shared-ownership schemes.
  3. Provide funds to assist Councils to convert unused buildings on the high street into homes.
  4. Provide funds to encourage the construction of 650,000 new houses this year.
  5. Offer deals with nine housing associations to increase the construction and availability of homes and to deliver over 13,000 homes this year.
  6. Provide lettings relief in relation to properties where the owner is in shared occupancy with the tenant, to assist homeowners and private renters.
  7. Provide guarantees of up to £1 billion for smaller house builders to assist with meeting the demand for house building.

Housing Reform Bill

The Bill has yet to be drafted, but in its first reading, it was suggested that its aims will be to:

  • Improve space standards
  • Increase the minimum thermal performance of new homes
  • Provide serviced plots of land, which is land that has water, gas, electricity and broadband connections already in place
  • Limit the number of plots of lands available to volume housing developers.

The proposals are loosely based on European systems on affordable housing. The Bill specifically likens itself to the scheme in the Netherlands that provides serviced plots to be bought at a minimal cost, to encourage people to build cost effective and affordable houses. The scheme, known as ‘Ik houw betaalbaar’ (literally meaning ‘I build affordable’), allows the option to rent first and buy later.

Comment

The government’s proposal to build more houses more affordably purports to be a neat answer to a pressing issue. However, it can only be one part of a much wider solution to a complex problem, as it fails to consider other relevant factors, such as the job market, cost of living, desirability of areas, and composition of households.

There is no simple or easy solution to the problem. In certain parts of the country, there is a surplus of houses and rooms going unused. These properties are often not of an appropriate size, structure or location to meet the demands of the population. Clearly ‘fixing’ the housing problem needs consideration of a wide range of factors, including job opportunities and schooling.

Further, the Housing Reform Bill is looking to curb some developers’ ability to build housing, but this might be considered counterintuitive. Arguably, the government might do better in enabling developers looking to undertake initiatives such as ‘build to rent’ properties.

The second reading of the Bill was originally due to take place on 8 February 2019. It was pushed back to 22 March 2019, but still failed to take place and with no rescheduled date - Brexit providing little bandwidth for anything else. The long-awaited second reading, which we will continue to monitor, will give us an indication of the viability of it becoming law.

This article was co-authored by Samina Entwistle, Trainee Solicitor, Manchester.

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