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Construction: Helping developers meet UK’s new homes targets

A new report delves deeper into the “housing crisis” facing the UK right now, and finds that more housing construction alone will not solve the issues. 

Construction of new housing is high on the political agenda, with the government continuing to pledge a target of 300,000 new homes a year. Despite a slowdown during the pandemic, housebuilding activity has remained strong, but the target is still yet to be met.

Places for People, in conjunction with the University of Cambridge Centre for Housing and Planning Research, has released an analysis breaking down some of the underlying causes behind the crisis and what problems it creates. It also sets forward some key changes that could aid the construction industry in its housing delivery.

David Cowans, Places for People’s group chief executive, says: “We recognise that it is a conversation that must take priority at all levels of the industry – from top level government, to those who support families and individuals with their housing needs on a day to day basis.”

“Despite progress in recent years, national and local politicians, and arguably many sector leaders and commentators, do not fully recognise the need to understand the housing market as a system, which meets demand for housing of different types, in different geographies, and at different price points.”

Homeownership versus renting

According to the report, the average house price in the UK quadrupled in the 25 years to 2020. This incredible statistic means those who did not own a home before the turn of the millennium are now more disadvantaged than ever in terms of housing costs. Of course, affordability is the worst in London, while many parts of the north of England do still have affordable housing stock.

In the private rented sector, by contrast, price rises have largely followed earning increases, says the report.

The report adds: “In 2019-20, the private rented sector accounted for 4.4 million or 19% of households in England. Throughout the 1980s and 1990s, the proportion of private rented households was steady at around 10%. However, the sector has more than doubled in size since 2002.

“If these trends continue, the private rented sector will become the largest sector within 50 years. In London, the pace of change is even faster, with private renting projected to catch up with owner.”

Issues affecting today’s housing market

The report acknowledges that a lack of housing stock does play a part in the changing market and inflated prices. Population growth and changing social patterns also influence this, though. Therefore, the issue comes from both the supply side and the demand side.

“On the supply side, we identify the principal drivers of the affordability crisis to be an ageing population; changing household patterns; the growth of cities; and the availability of cheap money.

“On the demand side we identify the principal drivers of the affordability crisis to be low volumes of “second hand” sales, a lack of choice in the market, and a long term failure to build sufficient homes to meet demand — driven by weak investment, high costs, and a combative and constraining planning system.”

One area where rental has certainly taken the place of homeownership is in single-person households, which have significantly grown in number. For many people who live alone, owning a home is simply not feasible, meaning most turn to the private rented market. Data from the ONS shows there are now a total of 27.8 million households, a 6.8% rise from a decade ago.

Is more housing construction the answer?

The report advocates the creation of more affordable homes, which would offer a step onto the ladder for many. It also suggests offering more saving support for first-time buyers, such as dedicated ISAs.

As has crept up in many analyses recently, the planning system comes under fire again here. Places for People wants to strengthen the planning system, making it “proactive rather than reactive”. It believes planners should focus on local patterns of demand when thinking about construction, and Metro mayors should play a bigger role here.

It also suggests incentivising local planning authorities to do “innovative deals with land holders in which consent is contingent on releasing land at, or close to, agricultural value, with the promise of an uplift later on through a financial stake in the development.”

The UK’s exit from the European Union could provide barriers in terms of a lack of construction workers, the report adds. This could “dramatically affect Britain’s availability to meet housing demand”.

Gemma Burgess, director of the Cambridge Centre for Housing and Planning Research at The University of Cambridge, adds: “Reports like those we have released this year help provoke conversations, and encourage industry and government leaders alike to engage in productive dialogue. We hope that these findings will form the basis of real action, helping developers deliver more, much-needed homes across the country.”

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