More and more commentators are beginning to focus on the need to build more housing in the UK, as the cost of buying a home rises beyond the reach of many potential buyers. And while this shortage has proven to be a good thing for the rental market, with higher demand, longer term tenants and healthy returns, there are signs that the demands are even outstripping the supply of properties to let.
Described as a ‘rabbit hutch,’ an ‘apartment’ in Islington was advertised for £737 per month and was recently removed from the market following an inspection which stated it was too small to meet legal requirements. Shortly after, another discovery was made in central London where a couple was found living in a garage with their eight month daughter, for £600 a month.
These cases represent the severity of the national house-building crisis. England has not seen such low house building rates since 1923. As a result, the average cost of property to salary ratio has doubled within the last 40 years. Although the biggest shortage rests in London, it has been estimated that in the South, the housing deficit will reach figures as high as 160,000 in the next 5 years. This situation will only be improved once local authorities are certain of what to build and where.
A decade ago, economist Kate Barker reviewed the housing market and stated that in order for price increases to remain at 1.1% per annum, 226,000 properties should be built per year. Currently, house prices are rising by 9% p.a. and only 115,000 homes are being built. Whilst Barker’s targets remain out of reach, other shorter-term targets have been proposed:
1. Review the planning system:
Before securing initial planning permission, certain requirements should be met such as a quota for the provision of social housing and a set payment to local authorities and facilities like schools and hospitals. This would ensure that the correct developments are made within the allocated areas.
2. Force local authorities to be more resourceful:
Local authorities are already responsible for creating five-year plans showing demand for homes and available land supply. However there is a gap between the amount of homes they state they’ll supply and the demand. Local authorities should be better at estimating demand and planning to satisfy it.
3. Retain the first part of Help to Buy scheme:
The first part of the scheme allows buyers to access an interest-free loan worth 20% of the value of a new-build home (IOW). This has been a driving force in bringing buyers back to the market and has been advancing supply as well as demand.
The cases in Islington and central London are just two of many, and will become more common unless addressing the housing shortage becomes a priority. To fix the issue, realistic aims should be set out and once these are reached, the government will be on the correct path to accomplish its more ambitious goals.