Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Written Evidence

Memorandum by the Kent Housing Group (AH 51)

This paper refers mainly to the issue of "the relative importance of increasing the supply of private housing as opposed to subsidised housing". However, other issues are touched on where relevant to the question in hand, in particular:

    —  "The economic and social impact of current house prices"; and

    —  "The relationship between house prices and housing supply".

  The Barker Review of Housing Supply (2004) contends that increasing the rate of house building is essential to making the housing market more affordable (or at least in lessening the sharp upward trend in house prices). The fact that demand for housing is increasing, coupled with the fall in construction rates, it is argued, has been contributory to the sharp rise in house prices in recent times. Therefore, it would seem that the key to achieving greater affordability is to reverse the negative trend in construction of new houses.

  The report goes on to suggest figures for the amount of housing required to effect this change. It is stated that reducing the trend of real house prices to reasonable levels will require between 70,000 and 120,000 new private sector houses to be built per annum in addition to current levels of provision. Additionally, an increase of 17,000 per annum in the supply of social housing is suggested as necessary to meet the needs of new households. Further, if inroads are to be made into the backlog of need for social housing, an additional 9,000 (on top of the 17,000) social houses will need to be built each year.

  However, although one must accept that an increase in the building of new houses is essential to achieving greater affordability, it is doubtful that the specific proposals for increased supply in the private and social sectors strike the correct balance. To explain, the essential problem with the current focus on increasing the supply of private sector housing (a focus that is duplicated in the Barker Review) is that such properties, once built, are introduced onto the market at the current market value. As a consequence, no real competition is drawn into the market and it is hard to conceive of how this will have a significant impact on house prices. Indeed, the building of such houses, if retained as the primary focus of Government activity, will most likely result in simply encouraging people to borrow more than they can truly afford, as evidenced by the recent 66% rise in Mortgage Repossession Orders, relative to 2004 figures.

  It is my contention that the solution to the issue outlined above is a far greater amount of social housing than is currently being proposed (even by the upper limit of the Barker Review). When one looks at the most recent housing needs surveys across Kent, it can be estimated that there is currently a Kent-wide shortfall of approximately 7,500 affordable homes per annum. If one compares these figures with those of the Barker Review (the maximum recommendation being for an additional 26,000 affordable homes per annum for the whole of England), it can be seen that the Review's figures are insufficient to meet need. Therefore, it is my recommendation that a more significant proportion of the proposed additional house building be constituted of social housing. Actual figures could be calculated from housing needs surveys across the country, although it should certainly be no less than the current standard Kent-wide practice of requiring 30% of all significant new developments to be made up of affordable housing.

  The recommendation above should also contribute to increasing affordability across the whole of the housing market (rather than merely in terms of providing more affordable housing), in that it should help to address the issue of demand, whilst also injecting an increased level of competition. To explicate, the provision of even greater levels of social housing should serve to draw a significant amount of current demand (predominantly in the form of first-time buyers) out of the private sector housing market and thus help to address the significant factor in the increase of house prices. In addition, the fact that social housing provides houses at subsidised rates may also aid the process of making the housing market more competitive in general, as the private sector market may be forced to "compete" with the social housing sector, to a certain extent. Finally, an increased focus on social housing helps to avoid the problems associated with buy-to-let landlords extracting new-build from the market and superficially inflating house prices.

  Another significant issue for Kent (East Kent, in particular), on which levels of affordability impact, is that of stock condition in the private sector. For example, in the Dover District 13% of private dwellings are classified as "unfit", as compared to the national average of approximately 7%. The issue in East Kent is that it has a high percentage of older housing stock, which is commonly associated with a higher incidence of poorer living conditions. However, the building of new private sector houses is unlikely to be able to remedy this situation, as the people who currently live in such households are typically either on low incomes or in receipt of benefits (and therefore incapable of buying such accommodation). However, the recommendation of an increased focus on social housing (as made above) would again obviously be relevant to this case, in that it would create the potential for those currently living in "unfit" dwellings to move on to high quality new-build and thereby also increase competition, perhaps resulting in landlords improving the "fitness" of their rented accommodation.

  Finally, on the issue of the relative deprivation of East Kent (and the perceived need to regenerate), it is important to note that simply building new homes is not sufficient. To explain, I feel that it would be inappropriate to press ahead with the building of new homes in such areas without coupling this with regenerating the area as a whole. In other words, the regeneration of such an area requires an additional focus on making full use of the existing stock. New-build, although important in contributing to making an area more attractive to live, will be of negligible real impact if it is not ensured that the area as a whole is a pleasant one to reside in (as the demand for such houses will be limited). This can only be achieved through ensuring that regeneration is tackled across the board (eg employment, education etc), together with maintaining current housing stock at levels that do not fall too far below the standard of new properties. Therefore, addressing the issue of Empty Homes and its causes (ie general deprivation) is essential in fully utilising the potential of new-build properties to affect change in the housing market. The building of new homes cannot therefore be treated in isolation. Additionally, it is worthy of note that bringing empty homes back into the housing market will help to increase affordability in the same manner that building new homes should, and in a more cost-effective manner.

  To conclude, it is my contention that the Government and the Barker Review have placed too much emphasis on increasing the supply of private housing as opposed to subsidised housing. Therefore, it is contended that a more significant amount of the additional housing provision envisaged should be constituted of social housing. Such an approach would contribute more effectively to the Government's aim of affordability than would the current recommendations and would most likely have some additional peripheral benefits, such as improving the overall standard of living conditions.

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