Robin Rathore of Bamboo Auctions argues that there is little point in building more new homes when people can’t afford to buy them because, thanks to rising housebuilding costs, they are too expensive.
Almost a year ago to the day, the now Prime Minister, Keir Starmer, proclaimed to the Labour Party Conference that a Labour government would “get Britain building again”. In that same speech, where he was briefly interrupted by a protester showering him in glitter, the Prime Minister vowed to “bulldoze through” the planning system and critically, build 1.5 million new homes over their first five-year term.
Houses haven’t been built at this rate since the 1960s, and back then, they were mostly built by local councils as social housing. Since the 1980s, house building has largely been left to the private sector, as social housing was mostly sold off as part of Right to Buy schemes.
More needs to be done to address the shortage in affordable housing. The average UK salary is around £35,000 a year. The average house price is £290,000 and the average rent is almost £16,000 per year. Studies have also shown that it will take almost 10 years for first-time buyers to save a deposit.
As with most critical issues these days, the temptation is to try to solve problems with binary solutions; and it appears that this is the same approach being taken with the current housing “crisis”. What we need is a comprehensive and holistic approach to solving the shortage in housing, a greater understanding of what kind of housing should be provided in the market - and crucially, who should be responsible for providing those homes.
With so much talk about the new housing targets and homebuilding, we don't just have a housing crisis, we have an affordable home crisis. It is no wonder that large housebuilders are not building as many houses. After all, there is little point in building more new homes when people can’t afford to buy them.
This is reinforced by the fact that Barratt Developments reported a fall in new homes built and blamed higher interest rates putting off buyers and inflation putting up costs. Buyers can’t afford to buy at the prices that are being set in the market.
To get onto the ladder, buyers may have to rethink their choice of location and manage their expectations of what might be available to them given their financial situation. For instance, it’s possible to buy a two-bedroom apartment in Leicester for under £150,000. The problem is that if you wanted to work in London, you’d have to spend upwards of £200 per day just to get there.
Labour plans to re-nationalise railways, but they could start early by subsidising rail travel so that people could live in Leicester for instance but work in London. It’s an hour to London from Leicester - about the same time as travelling from Clapham to Moorgate.
Perhaps this is an additional motivation behind introducing day one flexible working requests - so that people could get onto the ladder in areas outside London but still have the benefit of a London job and salary. Expect to see more information on Rightmove about journey times into London once the new employment act comes into force.
The government also needs to re-engage with SME developers, potentially being prepared to offer tax incentives to take on additional projects and enable smoother planning processes to allow more ground to be broken, whilst at the same time working with local communities to ensure that the infrastructure and local services are able to cope with the additional housing that is needed.
To address social housing needs, the Government should be doing more to either build directly or partner with developers on public-private partnerships. The latter might be preferable given that the major critique of the idea that local governments should build housing directly is that there is a lack of expertise in place to do so.
Indeed, Homes England is partnering with local developers, who can apply to be part of their delivery partner dynamic purchasing system (DPS), a portal where developers can apply to buy land directly from Homes England as part of a development plan.
There is no silver bullet to addressing the shortage in housing and the solution is going to require a holistic and multifaceted approach. It remains to be seen as to whether the Labour Government are the ones to finally solve this issue, although radical and brave decisions need to be made; sooner rather than later if that target of 1.5 million homes within the next five years is to be met.