The iconic British rite of passage has long been owning a home. An Englishman’s home is his castle – or so they say. As housebuilding in Britain continually struggles to keep up with the rate of population growth, the dream of “our house, in the middle of our street” is likely to remain just that.
Across the country, particularly in London, house prices continue to rise. A first time buyer in London requires an income of £77,000, nearly double the average salary required across the UK, which is currently at £41,000 for anyone looking to jump on the housing ladder. Compared to average wages of £27,999 and £22,044 respectively, the difference is already vast and doesn’t seem to be closing anytime soon, even with the prospect of the Living Wage.
David Cameron has been clear that planning rules will change to allow developers more freedom to build affordable homes for first time buyers, in a change of direction from past policy to encourage construction of affordable rental properties. Whether this has an impact remains to be seen, as it doesn’t address one of the main problems.
The rental market is faring no better, with tenants facing a 6.3% annual increase in rent in 2015. The overriding issue is clear.
We simply aren’t building enough.
The situation has spiralled out of control in recent decades that have seen populations grow and severe recessions strike. Recent government figures have shown that 131,060 homes were built in the 12 months leading up to June 2015, up 15% on the previous year, but projects starting were on the decline, falling 1% over 12 months to 136,320, with a worrying drop of 6% from March to June.
In his election campaign, Ed Miliband was pledging to build 200,000 homes per year, a target that many found to be ambitious, and some ridiculous. However, the Department of Communities and Local Government predicted in 2011 that by 2021 there will be an additional 2.2 million households in the UK, or 221,000 per year – Ed’s target is not looking so silly anymore.
Unless we find ways to start building enough homes for this population growth soon, the only outcome can be increased homelessness and poverty.
There are obvious reasons as to why there are not enough houses being built. Firstly, land restrictions mean there are very few options to develop in areas where there is demand for housing. A tipping point will be met whereby public land will not quench the insatiable demand for new builds and private land will be required.
Secondly, there are well publicised issues in the supply chain, whether it’s a lack of bricks or a lack of brickies, there is a desperate need to invest in training and apprenticeships to get people back into the industry who left due to lack of opportunities during the recession, as well as promoting a career in construction as both a progressive and interesting path to follow.
As part of the reform by the incumbent government, planning rules will be relaxed to allow developers more flexibility with their designs, which will allow cheaper builds, hopefully leading to a 20% reduction in end price.
While a strong concept, there remains no incentive for developers to build more. We can expect them to build faster to reduce their costs to compliment the change in design philosophy, but why would they try to increase supply? The market for housing tends to fluctuate quite significantly, so realistically there is no incentive to change a winning formula.
To overcome these issues, discussions need to be held between government and the private sector to uncover the right incentives to encourage developers to build more, and fast. If not, the dream, or rite of passage that is our house, our castle and our keep, will remain in the imagination of generations to come.
Across the course of 2016, Oliver Kinross will be hosting leading construction exhibitions and conferences, North England Build 2016, London Build 2016 and Scotland Build 2016. The opportunity for a booming market is firmly in place with the Northern Powerhouse starting to boost the sector outside of London, which continues its superb growth.
The conference sessions, which will feature leading governmental figures such as Dr David Hancock and Karl Tupling, as well as leading developers from both the public and private sector, will promote discussion and find answers to questions such as “How do we fix the skills shortage?” and “How do we bring more affordable homes to market?”.
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