Opinion: why Government’s new housebuilding plan still falls short

The Government is finally addressing the supply shortage but it’s a long way from enough, says our writer.

It’s the Tory party conference, so all eyes are on Birmingham where the ruling party is laying out its ‘A country that works for everyone’ strategy and plans.

And it’s good news that, among those plans, are pledges to focus on house building and transport as a greater priority than deficit reduction.

It’s a massive change to previous Conservative policy and means that new chancellor Philip Hammond stands to become rather more popular across the UK than his predecessor George Osborne – whose fixation on balancing the books caused many economists to warn he was actually harming the economy.

I am certainly not going to complain that Theresa May’s Government is doing what I (and a lot of people) called on her to do when she came to power. 

However, I do think we need to point and laugh at the promised housing initiative.

Point, laugh, then email our MPs and demand more is done to protect an entire generation from being priced out of property.

Looking to buy a home or simply remortgage? Search for a cheap mortgage rate

What’s been promised?

Mr Hammond says the details will be set out in the Autumn Statement next month but that the Government is going to use “all the tools at its disposal” to increasing the country’s housing stock.

“Making housing more affordable will be a vital part of building a country that works for everyone,” he declared.

No argument with that from me. However, when you look at what’s being promised, it doesn’t sound like the housebuilding revolution I think this country desperately needs.

Communities secretary Sajid Javid has said there is a “moral duty” to tackle the country’s chronic housing shortage and I support and applaud his comments.

However, he and Mr Hammond have announced a £2 billion investment to boost housebuilding.

The exact number of new homes this will deliver isn’t entirely clear – it seems the new money will deliver up to 15,000 homes by 2021.

And the £3 billion Home Building Fund should encourage at least 25,000 extra homes by 2020, with many more in the longer term.

According to the FT, the Treasury estimates that the various plans (including relaxing planning rules, building on public land and encourage custom-builds) will deliver almost 60,000 more homes by 2021.

Javid's numbers are small. Accelerated building (public land) aims to provide 15,000 new homes by 2021. Tiny proportion of demand... #CPC16

— Samuel Horti (@SamuelHortiPW) October 3, 2016

A drop in the ocean

Brilliant. We desperately need those homes. But we desperately need even more: if these 60,000 extra homes are delivered in the five years to 2021, that’s an extra 12,000 homes a year on average.

At the moment, the UK is building just 170,000 new homes each year – when most people agree we need a minimum of 250,000 a year if we want to slow runaway price inflation and meet the next generation’s needs.

Even with the Government’s new plans, we will still be short of 68,000 homes every single year.

In fact, even 250,000 new homes a year (which we are not achieving) wouldn’t be enough, according to some.

The Economic Affairs Committee has said that at least 300,000 new homes need to be built each year for the foreseeable future – and that we have to stop relying solely on private developers to achieve that.

Lord Hollick, chairman of the committee, warned that both homeownership and even renting is unaffordable for many people and that this can only be remedied by the state getting in on the housebuilding act.

“The country needs to build 300,000 homes a year for the foreseeable future.

“The private sector alone cannot deliver that. It has neither the ability nor motivation to do so.

“We need local Government and housing associations to get back into the business of building… It makes no sense that a local authority is free to borrow to build a swimming pool, but cannot do the same to build homes.”

15,000 homes on public land by 2021 doesn't sound very accelerated #CPC16

— Jules Birch (@jules_birch) October 3, 2016

What about renters?

Whenever I write about the importance of building more homes, people accuse me of prioritising the households who could afford to buy if the market was brought under control.

What about those families and people who will simply never be able to afford to buy and those who prefer to rent anyway?

Well, homeownership is an issue that permeates the entire market and has a direct effect on those people.

When affluent young professionals are priced out of buying property, they rent longer and they compete for the better rental properties.

That forces up rents, which filters down until everyone’s monthly rent costs more.

According to HomeLet, the average cost of renting a property outside of London rose by 5.1% in the 2015/16 financial year, while tenants in the capital saw their rents rocket by 7.7% in that time.

And the shortage of new builds will also obviously have an impact on the availability of affordable rented accommodation.

Property is at a premium, too many tenants are chasing too few homes – so of course rents will keep rising.

Pouring more homes into the property pool is the only way to change this.

Opinion: we need more homes for later life

Compare mortgage rates on loveMONEY

But the Government is doing loads to help, right?

It is only fair to acknowledge that the current Government and the previous Coalition and then Cameron-led Governments have tried to help young would-be homeowners.

Unfortunately, the policies have consistently supported property price inflation while failing to address the root cause – not enough homes are being built.

At least May’s Government seems to have turned its attention to fuelling supply rather than demand.

Help to Buy supports buyers to pay high prices for properties, meaning it boosts prices but does very little to encourage more home building.

The two key schemes available – Equity Loans and Mortgage Guarantees – have helped 150,000 first-time buyers onto the ladder they were introduced in 2013.

The campaign group Generation Rent suggests that by 2020 the help available could have supported around 400,000 new buyers into home ownership.

Yet before the housing market crashed, that’s how many first-time buyers there were in a single year. 

Meanwhile, 4.5 million households are renting privately, paying for house price inflation with rising rents but reaping no benefit and enjoying no security of tenure.

And don’t get me started on Right To Buy.

Expanding the Right to Buy scheme across housing associations will affect their ability to provide new affordable homes, drain major cities of affordable properties for lower income families, wastes billions of pounds that could be spent building and unfairly benefits a tiny minority of social housing tenants at the expense of the millions trapped in insecure private rented accommodation.

Look, the housing market crisis has been caused by a shortage of homes.

It’s great that the Government is trying to address that, but we need to plough more money into ensuring even more are built – not waste it helping today’s buyers afford inflated prices.

What do you think? Is the Government whistling into the wind or will this investment make a real difference? Does homeownership even matter? Have your say using the comments below.

More money views from loveMONEY:

Let's build more homes for later life

Should we give everyone in Britain a basic income?

People who take advantage of pricing errors are immoral