Investigating the Housing Crisis
Back in 2007 the Labour Government set a target of 240,000 homes a year to be built by 2016, in order to sufficiently meet forecasted demand. At current levels, the UK is quite a way off meeting this target. The National Planning Policy Framework (NPPF) highlighted that, “in the 12 months ending September 2014, only 117,070 houses were completed.” In fact, in 2012-13 the UK hit a post-war low of only 135,500 homes built.
But investigating and pinpointing exactly why the number is not being met opens up a minefield of debate; from the lack of social housing, limited building supplies, to the proposed link to poorly regulated immigration policies. Clearly a tricky subject to tackle with a myriad of issues, but this piece will dive in regardless and take a look at some of the possible causes for the UK’s current lack of housing:
Planning permission, red tape and local opposition
When UK house builders were surveyed earlier this year, they recognised that the house building target, even when modestly reduced to 200,000 by the Coalition, was in their eyes “unachievable”. This is a damming indictment from those at the front end, as they recognise that there are simply too many barriers preventing the UK from producing a free and fast-flowing house building system. The Home Builder’s Federation (HBF) pointed out that the current system is just “too slow, bureaucratic and expensive”. When questioned further, house builders suggested that the two main reasons for this are the planning system itself and local opposition.
The Coalition has made some moves to tackle these issues, such as slimming down NPPF regulations to streamline the system and increasing annual planning permissions close to 240,000. But Chris Walker, Head of Housing and Planning at Think Tank Policy, warns that not all permissions are built: “We probably won’t even get to 200,000 on the back of that 240,000”.
Affordable land, priority of profit and social housing
The charity Shelter points out that land prices have inflated “massively “in recent years. In fact, residential land prices rose 170% from 2000 to 2007, compared to house prices which rose 124%. Jeremy Blackburn, Head of Policy at the Royal Institution of Chartered Surveyors, suggests that public sector land is only one element. He emphasises the importance of actively encouraging private landholders to also release sites for homes.
Under the current system, house builders are not forced to use land that is bought, which could change under a Labour government with their “use it or lose it” policy. This would lead to house builders and developers being encouraged to build on land immediately, instead of gradually releasing properties in order to keep profit at maximum levels. It is business after all, therefore only strong state intervention for the good of the country can force the hand of house builders in the UK.
Several comparisons have recently been made between the private sector’s current domination of the house building market and the post-war boom of social housing. This era saw on average 100,000 public sector homes built a year, a trend that continued all the way through to the late 1970s. Although there is still much scope and need for private sector building in the UK, it has simply not produced enough homes on its own in recent years, which suggests an emphasis on social housing in the near future is fast becoming a necessity.
Materials, labour and small business
As we have already covered the grass roots of house-building, it is important that we also look at the production side of the industry. It is vital to ensure that we have the labour and materials needed so that once buildings have been approved, the process can move forward quickly, economically and cost-effectively. Planning permissions were last year granted on 230,000 homes, more than an improvement to previous years; but do we have the necessary materials and skills to produce the homes and meet demand?
Matthew Pointon, property economist at Capital Economics, suggests that “the surge in demand in late 2013 and early 2014 led to materials such as bricks running out”. According to monthly reports from the Department for Business Innovation and Skills, and the Office for National Statistics, stockpiles of vital building blocks dipped to 323m at the end of October 2014, down almost a third from 2012, and massively down from stocks of more than 1bn recorded in 2009.
If the UK wishes to meet the housing demand, it will also need to address the current shortfall of skilled labour, such as bricklayers and construction workers. In response, tens of thousands of new housebuilding jobs and apprenticeships are up for grabs under a deal struck in November 2014 between ministers and the industry. But training a labour force needs time, with the government even proposing bringing former military personnel onto building sites to cover the shortfall of labour.
An important area of the industry that has seen one of the biggest declines, is the number of small to medium businesses that are able to develop land. In 2007, there were 15 firms providing more than 2,000 homes a year. The following year there were just six. The effects of the financial crisis have exacerbated the issue by restricting lending criteria and making it difficult for small business to invest and gain traction in the market. In fact, data from the HBF shows how the number of firms in England and Wales building 100 or fewer units a year fell significantly over the 24 years preceding 2013.
The government is attempting to put strong solutions in place to solve the issue, but many experts feel more needs to be done before we see the results and numbers needed to solve the UK Housing Crisis.