The housing white paper: worth the wait?

After his progressive announcements around housing and infrastructure in the last Autumn Statement, the Chancellor promised a white paper intended to address the housing crisis in more detail. After much anticipation (and some delay) that paper has arrived.

Entitled ‘Fixing our broken housing market’, the government has finally admitted that the possibility of homeownership is a ‘distant dream’ for many of today’s young families, and sets out a range of reforms to encourage ‘more of the right homes, in the right places’. However, the report brought little by way of tangible support to accelerate house building, beyond the funding already laid out in the Autumn Statement (covered in our blog, here), and the industry has reacted with a certain degree of disappointment.

While some more robust changes could have been made, we welcome a recognition of the importance of the private rental sector, aiming to give security and a better experience to those who must (or prefer) to rent, and confidence to investors entering the property market that their contribution is essential. Here you’ll find a summary, and some thoughts from our property experts.

 

A summary: More housing, promised faster

We need around 250,000 new homes a year to keep pace with population growth, and to stop the shortfall increasing. This is in comparison with 170,000 built in 2016 and far beyond any level achieved in recent times. However, the problem isn’t space; only 11% of the UK is built on at present. The government believes it lies in three areas that they can address:

1. Local Authorities are not planning for the homes they need. More than 40% don’t have a plan that meets the projected growth in households in their area. Local Authorities must now publish up to date housing delivery plans (reviewed every 5 years) and will assess the need for housing in their area under a new standard methodology, set by the government. They will also be allowed to increase their planning fees by 20%, if they commit to investing the additional revenue into their planning departments.
2. Housebuilding is too slow. There is often a long delay between planning being granted and homes built. More than 1/3 of new homes granted planning between April 2010 and April 2016 have yet to be built. Developers must use planning permission once it is granted, or it will be taken away, which should also help reduce land banking. Greater weight will also now be placed on brownfield sites and unused public land for housebuilding, while the Greenbelt will continue to be protected. This is all coupled with the additional funding for housebuilding and associated infrastructure, announced in last year’s Autumn Statement, demonstrating the strength of the government’s intent.
3. Construction industry too reliant on a small number of big players. The biggest ten housebuilders account for 60% of new private homes, leading to a lack of competition and innovation in the industry. The government plans to open the market up to small and medium sized builders who embrace innovative and efficient methods with support from the previously announced ‘accelerated construction programme’ and the home builders fund. Housing associations and Local Authorities will be encouraged to build again, institutional investment into development will also be encouraged, and so will the building of more modular, and factory built homes.

 

Our comments:

The commitment to more affordable rental stock

With more and more people forced to rent permanently, it’s clear that there is an urgent need for affordable rental stock, longer-term tenancies, particularly for families, and a professionalised rental sector. The new commitment to boost the supply of affordable and privately rented homes is a sage one, although ownership of this type of property is likely to be concentrated among housing associations and large investors.

 

Encouraging institutional investment… how?

The emphasis on supporting investment into housing from institutional investors is logical. However, it is unclear what tangible incentives the government will use to encourage institutions to support house building, beyond the positive measures announced in last year’s Autumn Statement. This could be viewed as a missed opportunity to offer some kind of real financial incentive. However, it does provide greater certainty to investors at a time when our housing market is in need of injections of new capital.

By its nature, institutional investment means developing homes for rental, i.e. “Build to Rent”. While the previous conservative government made things progressively more difficult for residential landlords with a series of tax changes, this firm statement of commitment to supporting the building of new homes, designed for rental, is a positive.

 

Conclusions: new support for the rental sector

While many found themselves underwhelmed by the housing white paper, the picture is not all negative. It is both fairer and wiser that the government has moved to a more balanced view of the property market, which must work for those renting, as well as those who aspire to homeownership. Encouragement of institutional investment is a recognition of the important role that investors can play in providing high quality accommodation and a quality experience for renters.

Let us not forget either, that the commitments made in the Autumn Statement still stand: to double spend on housing, to support associated infrastructure and innovation, and to create a fairer market for the ever increasing number of tenants. While more could certainly have been done to tangibly incentivise investors in the housing market, which would help narrow the ever increasing shortfall in stock, the changes made are, at least, a positive step.