News

UK Housing Shortage

With or without immigrants, the UK housing supply is failing to keep up with demand. For the past twenty years, housing stock has Increased annually by 100-170,000 dwellings but that is only half the required amount.[1]

UK Housing Shortage

As prices have continued to rise [2], the average age of first time buyers has risen to 30[3] and the Housing Minister, Gavin Barwell, this week suggested that grandparents should help the young on to the property ladder by disinheriting their children and leaving their houses to their grandchildren. It happens that his mother has just made this change to her will and has five grandchildren so it is likely, after inheritance tax is paid, that they might each have enough of a nest egg to enable them to make a deposit on a modest first home. Some families are larger and the spoils would have to be shared between more cousins. The idea is a kind gesture but unlikely to solve the housing crisis.

Highly controversial is the scheme to build on land zoned as green belt. Supporters claim that green belt zoning has been used by councils to withhold relatively worthless land for monoculture farming or even car parks and that it should be put to residential use.[4] Critics such as the Campaign to Protect Rural England (CPRE) claim that green belts act as a buffer between towns and villages, preventing sprawl, protecting wildlife and generating oxygen for the densely populated areas they surround. Development goes beyond the construction of houses. In order to live in and access those houses, people will need water supply, mains drainage, roads and possibly even, services such as doctors’ surgeries and schools.

Less controversial is the plan to build on brownfield sites. Last year, the former government went so far as to announce that planning permission for building on brownfield sites would be granted automatically. The reaction was broadly positive to this announcement but property consultants Daniel Watney had this to say:

The greatest challenge to developing on brownfield land isn’t the speed of the planning process, but remediation costs

Charlie Mills,  Head of Planning, Daniel Watney

Even without complex and pricey remediation, Savills calculates that it costs roughly £100 per square foot to build a home on a brownfield site and that it must then be sold on at £200/sq ft in order for the developer to cover additional land purchase and financing costs and turn a profit. This often pushes these homes into the upper quartile in their local market and many are built in former industrial zones or otherwise removed from city centres; access can be a problem and buyers are unlikely to pay a premium price for living there.

Nor is the cost of developing brownfield sites the only problem with them. The other is, again, supply. There are only 66,000 hectares of this poor quality, remediable land in the UK and not quite half of that quantity is deemed suitable for housing.[4] It would take a high density of almost 50 dwellings per hectare to achieve the government’s aim of 1.5 million homes on brownfield.

So what is the solution? A combination of the above? If we combined two recent trends – teleworking and the shared economy, we might see abandoned offices converted into residential complexes. Or hotels, undone by AirBnB, shedding excess assets.

Then again, we might just try providing finance to housebuilders. To this end the former government established the Housing and Finance Institute in 2015, to provide local councils and businesses with new finance models and development opportunities. On its website, it lists a number of ‘key housing and infrastructure questions’. Top of the list: “How do we build more homes faster?”[5]
 
[1] The Telegraph.  We must build on the green belt.  20 April 2016.  www.telegraph.co.uk
[2] International Monetary Fund.  Real house prices over the past year.  2016/Q1.  www.imf.org
[3] Halifax.  Seven year age gap revealed between UK’s youngest and oldest first time buyers.  Static.halifax.co.uk
[4] Department for Communities and Local Government.   www.gov.uk
[5] The Guardian.  Six reasons why we should build on the green belt.  21 May 2014.  www.theguardian.com
[6] Housing and Finance Institute.  Research Highlights 2016.  Conference Special Edition.  thehfi.com