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Will the government’s national house building crusade deliver the homes we need?

  • Caroline Green
  • Sep 14, 2016
  • 6 min read

The consequences of decades of failure to build enough homes are already keenly felt by the millions of people who cannot afford the homes they need and want and the problems look set to intensify for future generations. Without a change of course, the country is set to be short of two million homes by 2020. Recent polling from Ipsos MORI indicates that the level of public concern about housing is at its highest for 40 years, particularly amongst 18-34 year olds. According to London Chamber of Commerce, four out of five employers believe that a lack of affordable housing is stalling economic growth and limiting their ability to attract and retain skilled workers.

At long last, it seems the question of how we will build more homes is firmly embedded as a top priority for Government. David Cameron in his Party Conference speech of October 2015 launched a national crusade to get homes built and Government has made a bold commitment to build one million new homes by the next election. That is no small challenge. It will require house building to ramp up in the next two years to somewhere close to the 240,000 new homes per year that most experts agree are needed - something that the country hasn’t achieved since the mid-1970s. Latest government house building figures indicate that we built in the region of 155,000 homes in 2014-15. While that is an improvement on the darkest years of the recession there is still a long way to go to plug the gap.

So, is the Government’s housing strategy to date enough for the crusade to succeed? That is the question that the group of experts that made up the Lyon’s Housing Commission addressed in a recent short update report published in February this year. In summary, the conclusion was that though Government has taken positive steps that will help increase house building, a much more comprehensive strategy is needed to deliver the step change in housing supply needed and ensure it can be sustained across future economic cycles.

It is not surprising, that the focus of Government’s strategy to date has been heavily focused on increasing homeownership and support for first time buyers. There is no doubt that the housing crisis impacts most heavily on younger generations. The cost and scarcity of housing means many young adults are unable to establish independent households of their own. One in four adults between the ages of 20 and 34 are still living with

their parents which is hardly surprising when the typical first time buyer needs a deposit equal to 65% of their income and the average household spends 40% of their income on rent. For increasing numbers of young people, the prospects of home ownership look like an increasingly distant promise.

It is right therefore that more can and should be done to help more people own their own home, but even with the government’s flagship policy of starter homes, extension of Right to Buy and the welcome expansion of shared ownership schemes, we simply will not build enough homes at prices that everyone can afford to buy. There will continue to be those for whom home ownership is not an option or their preferred choice.

To effectively tackle the housing crisis and deliver the rapid and sustained increase in house building needed, we will need to go beyond a focus on home ownership to recognise that building more homes for rent has a very important part to play in driving up housing supply, supporting a functioning economy and increasing affordability and choice. Given the concerns, about another economic downturn, greater attention needs to be given to an effective counter-cyclical strategy to achieve a steady profile for house building that can withstand economic shocks. Investment in homes for rent, both at market and sub-market rent in addition to support for homeownership can play an important role in driving up build rates and providing some insulation in counter-cyclical periods. The fact that homes built specifically for rent do not compete with the traditional developer business core model of building homes for individual buyers, means there is a significant opportunity to increase the number of homes built. Tapping the potential for large scale institutional investment in homes for market rent could not only counteract the shortage and improve quality of rented housing, particularly in London and other areas of intense housing shortage, it could help unlock wider development and urban regeneration opportunities.

There is a real concern that in placing emphasis on those who aspire to, and can realistically expect to own their home, Government policies will decrease the availability of affordable homes for rent with detrimental impacts on other citizens and increased pressures on the public purse in future. Research from Shelter cautioned that Starter Homes could be unaffordable for families on average wages in 58% of local authorities. At the same time developers will be able switch their required affordable housing contributions to starter homes leading to a further reduction in new homes at sub-market rents. Furthermore there is a question of value for the public purse since, under the current proposals, the individuals buying a Starter Home will be able to sell it at full market price after five years. Government will need to work more closely with the industry in developing its model for starter homes to ensure an overall increase in homes and that the public subsidy of these homes exists in perpetuity to benefit future generations of house buyers and does not result in a reduction of affordable homes to rent.

The extension of Right to Buy, the reduction of social rents and the classification of housing associations as public sector entities have caused concern and uncertainty in the housing association sector. At the same time, councils’ investment plans have been seriously affected by the reduction in social rents and the requirement to consider selling high value council homes to fund the extension of the Right to Buy to housing association tenants. The LGA has recently estimated that up to 80,000 council homes could be lost as a result of Government policies unless councils are given greater powers to build new homes. As the Lyons review identified, England has only ever built sufficient homes to meet housing need when a strong role has been played by councils in supporting supply. Between them, housing associations and councils built 28,380 homes in the year up to September 2015. This is an important contribution and it must be expanded if we are to reach the target of 240,000 homes per annum. If lost or impaired it will cancel out gains made in increased supply for example of starter homes. Finding ways in which local authorities can promote, support, finance and commission new homes and giving housing associations the certainty they need to plan long term is therefore critical if the Government is to achieve its targets.

What is more, government’s ambition on housebuilding simply won’t be achieved by relying on the existing industry to build homes for sale. More needs to be done to encourage a wider range of organisations, both public and private, into house building through joint venture partnerships, new delivery models and a more diverse mix of housing tenures. In particular there is significant capacity in the construction industry to play a greater role in housebuilding in partnership with a wider range of commissioners of housing including housing associations, regeneration agents and local authorities.

Government have recognised the importance of strengthening local government’s ability to assemble land and drive progress on complex schemes as reflected in the powers granted to Greater Manchester and London to set up Mayoral Development Corporations. The Lyon’s Commission recommended extending this approach through a new generation of New Homes Corporations to play an active role in land assembly, commissioning development and powers to capture land value to invest in infrastructure. One of David Cameron’s announcements in early January – direct commissioning of housing on public land – is a promising step. If adopted at scale this could offer a means to get a wider range of partners into house building, most notably tapping into the capacity that exists in the wider construction industry through increased commissioning from the HCA; housing associations and local authorities.

Lastly, but crucially, Government must ensure that the drive for volume does not come at the expense of the quality of the homes and places that are built. The weakening of policy on zero carbon homes, a retreat from meaningful space standards and the collapse of the previous Government’s policy for sustainable drainage raise concerns that quality and sustainability have reduced importance in Government policy. Far greater emphasis on the importance of quality of homes and places is needed to ensure that the legacy of Government’s national crusade on house building is the creation of great places to live.

Caroline Green was formerly the Director of Research for the Lyons Review and is now Assistant Chief Executive at Oxford City Council.

The full report of the Lyon’s Housing Review is available at http://www.yourbritain.org.uk/uploads/editor/files/The_Lyons_Housing_Review_2.pdf ; and the update report published in February 2016 can be found at http://www.housing.org.uk/resource-library/browse/lyons-housing-commission-update-report/

1 Ipsos Mori Issues Index 2015

2 London chamber of Commerce and Industry, Getting our House in Order, 2014

3 Net supply of housing: 2014-15, England, DCLG Housing statistical release November 2015

5 Council of Mortgage Lenders, Helping the Bank of Mum and Dad, June 2013; English Housing Survey, 2012/13

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