small wooden houses

The Lender’s Corner: Removing housebuilding targets will be a backwards step

Martese Carton, Director of Mortgage Distribution, Leeds Building Society.

April sees the Levelling Up Bill reaching its final Parliamentary stages. The government’s consultation into its proposed planning changes has now closed, and the industry awaits its response with anticipation.

As a result of the new Bill, the government’s manifesto commitment to build 300,000 new homes each year by the mid-2020s could be confined to the annals of history. Rather than there being a specific government target for house building, the government wants to make councils responsible for developing local plans for new housebuilding levels. Many industry commentators have indicated that this will mean that targets will become purely ‘advisory’ which will simply water down the power of the planning inspectorate.

Everyone agrees that there is no silver bullet when it comes to solving the UK’s housing crisis but nationally set housebuilding targets exist for a reason. Indeed, The Home Builders Federation previously warned that scrapping the 300,000 annual targets could lead to 100,000 fewer homes each year being built and deprive the economy of £17 billion in housebuilding and supply chained output. This is simply unacceptable.

The likely removal of housebuilding targets does so against the backdrop of yet another failure by a government to reach the existing 300,000 target. Recently released government figures showed that 210,070 new homes were built in 2021/22. These figures fall well short of the annual target – which was last achieved in 1977.

Housing costs are at their most unaffordable level for over a century:

There is little doubt that home ownership remains the preferred tenure of choice for millions of people. Owner occupation levels peaked in England in 2003 at 70.9% and then fell steadily until the start of 2017 when the trend started to reverse. This reversal has now paused – there are currently just over 15.6 million owner occupiers in England, representing around 64% of total households. It is estimated that there are currently just over 24 million households in England.

Although demand for housing continues to increase, we are facing a chronic shortage of homes resulting in soaring house prices which drive deposit requirements and mortgages ever higher. This means first-time buyers are finding it harder than ever to get on the ladder and it is now the hardest time to afford a home since our founding year in 1875, a sad reflection of decades of government inaction to tackle the UK’s housing crisis.

But the longer-term aim for the government must be to address the drastic shortage in housing. The issues facing homeownership are deep-rooted and wide-ranging but building enough homes to meet demand is the right place to start.

Achieving these targets will be difficult, and it will take all parts of the market to deliver this level of housebuilding, from private developers to housing associations and local government, but with enough political will, a decades-old problem can surely be overcome and would start to deliver on the homeownership aspirations of millions of people.

Housebuilding through the decades:

To understand why we have a chronic shortage of housing it’s worth looking at the history of post-war government housebuilding strategies in the UK.

There was a huge shortage of housing in post-war Britain – with over half a million properties being destroyed by air raids during the war. It was estimated that around 3 million new homes were needed immediately and as a result the government aimed to build over 300,000 new homes each year. However, there were shortages of builders, materials, and money.

Despite this, the government embarked on an extensive programme of housebuilding in which local authorities played a major part. A growing economy meant that around 250,000 new local authority homes were built each year in the 1950s. Much of the new building were in the so-called “New Towns” being built on the green belt surrounding London to replace the homes lost during the war.

Many “non-traditional homes” were built using various prefabrication approaches, which pushed up housing output to 354,000 new homes in 1954. As a result of these new building approaches, total annual new housing completions soared, and peaked in 1968 at around 400,000 – the highest ever annual level.

The 1960s was the decade of tower blocks, and the availability of new homes pushed up owner occupation levels still further. By the end of the decade there were as many owner occupiers as renters. However much of the high-rise living was not successful, with some tower blocks being demolished within 20 years of them being built.

The 1960s saw the largest number of new homes built at over 3.5 million. Since then, the number of new homes built each decade has declined and the latest figures show that just over 1 million new homes were built in the 2010s – the lowest level since the war.

Despite the continued increase in demand for homes – particularly from the baby boom generation in the 1970s – the number of houses built has declined decade upon decade, reducing by 69% since the end of 1960s.

graph showing number of houses build each decade

Government housing policy has changed over time. Whereas slum clearance was a key priority in the 1950s and 1960s, it is no longer central to the current governments housing policy. Post-war Britain saw the large-scale demolition of sub-standard housing. Between 1953 and 1985 over 1.5 million homes were demolished because of slum clearance – displacing around 3.8 million people.

The removal of so many properties, and the inability to build sufficient homes for a growing and ever-changing population has been central to the housing crisis we now see today.

Current government housing policy focus is both on increasing supply whilst also improving the quality of the UK housing stock which is the oldest and least energy efficient in Europe.

The other major shift in housing policy over the last 70 years has been in the public provision of housing – now known as social housing. From the start of the 1950s until the 1980s, the provision of social housing was aimed at households on a range of incomes, but recently the emphasis has been on allocating new lettings to those in greatest need.

The dream of owning your own home remains strong:

Housing targets help to catalyse supply as well as providing consistency and stability – all things the market desperately needs as we seek to rebalance supply and demand.

We need a national conversation about the reasons why we’re building homes. To make our country prosperous and grow the economy, I believe everybody should have a home that’s decent and affordable. Secure housing is more than a roof over our heads, it drives positive outcomes in health, education, and social mobility.

It’s understandable that people are protective of their communities and don’t want undue disruption or pressure on services and infrastructure, but the trade-off is between that, and millions of people being blocked from the benefits home ownership brings.

Those supporting the effective removal of the 300,000 housing targets argue they want to put control in the hands of local people. Housing numbers will still be available – but these will be in local plans (or separately if there are no plans in place). We agree this is an essential component of deciding the development of communities, but this is no reason why the government should step back from having nationally published housing targets.

With the affordability of home ownership now at its worst point for 150 years and housebuilding levels at post-war lows, it is clear that housing must be a key battleground at the next General Election.

Tackling the UK’s Homeownership Crisis – Leeds Building Society.

https://www.leedsbuildingsociety.co.uk/_resources/pdfs/your-society-pdfs/tackling-uk-homeownership-crisis.pdf

Home ownership remains the crowning glory for millions of people – Leeds Building Society.

https://www.leedsbuildingsociety.co.uk/_resources/pdfs/press-pdfs/press-releases/homeownership-remains-the-crowning-glory-for-millions-of-people.pdf

 

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