Memorandum by the Home Builders Federation
(HBF) (AH 80)
SUMMARY OF
EVIDENCE
S.1 Ensuring we have a sufficient supply
of the right housing in the right places is critical to the nation's
long-term social and economic wellbeing.
S.2 A key factor contributing to the increasing
difficulties with affordability in the housing market is that
too few new homes are being built. Although housing completions
in England increased by nearly 20% in 2004 compared to 2001 this
increase was from a historically low base in modern times. The
total number of homes built in the UK has been declining since
the 1960s and remains insufficient. [149]
S.3 Affordability is further exacerbated
by the rise in the number of households wishing to access housing.
An additional one million households were formed in England between
1996 and 2003. [150]
S.4 Kate Barker's "Review of Housing
Supply" was right to conclude that the UK needs an increased
supply of housing over the long-term. There is no short-term panacea
to solve the difficulties with affordability. (Indeed, without
a sustained increase in supply some shorter-term measures designed
to tackle problems of affordability may themselves risk contributing
to increased prices.) The priority is to reverse the trend of
demand out-stripping supply. Increasing supply to bring it into
equilibrium with demand is the only way to restore the long-term
health of the housing market and ensure sustainable affordability.
HBF's members therefore want to build the right number and types
of homes, in the right locations, to meet people's needs over
the next 20 years.
S.5 As the Barker Review argued, bringing
housing supply steadily into equilibrium with demand will help
ensure greater stability of house prices over the long term. This
will ease the affordability gap as wealth creation will allow
wages to increase and average dwelling price to income ratios
to fall.
S.6 The UK can cope with an increase in
housing supply. Currently some three-quarters of the population
only use 7.2% of the land. [151]Kate
Barker stated that under the extreme assumption that all new house
building would take place in the South East, her more ambitious
scenario of 120,000 additional private homes each year would use
about 0.75% of the total regional land area over the next 10 years.
[152]The
environmental impact, including land use, is capable of being
managed to meet sustainable development requirements. Increasing
the supply of homes to meet demand offers the people of Britain
the opportunity to live in better, less crowded housing.
S.7 If we fail to seize the current opportunity
to sustain a substantial increase in supply, the divide between
the haves and the have-nots of housing is likely to become more
severe. This will have damaging consequences for social justice
and community cohesion. It is the vulnerable in our society who
suffer most from the current housing shortage.
1. The potential benefits of and scope to
promote greater home ownership; and the extent to which home purchase
tackles social and economic inequalities
1.1 A home is essential to the quality of
people's lives. It can be fundamental to an individual's or family's
identity and sense of well-being. A home provides a secure base,
helping people to:
— become part of a community;
— seek or retain employment; and
— access schools, hospitals and other
services.
1.2 Home ownership enables people to exercise
their own choice about the community they live in, the distance
they live from their place of work and which services they may
access. Affordability is one of the key factors in determining
how people exercise such choice when choosing a home of their
own. Ownership, in contrast to other forms of tenure, also offers
greater opportunity for people to invest in raising the standard
of their home.
1.3 There is both the scope and need to
promote greater home ownership, reflecting the priorities of people
in Britain. The Council of Mortgage Lenders suggests that 81%
of the population aspire to own their own home within 10 years.
[153]Other
studies have shown that as many as 90% of the population aspires
to own their own home. Recognising the aspiration for home ownership
and giving people as much scope as possible to exercise that choice
is key to ensuring a functional society.
2. The economic and social impact of current
house prices
2.1 There is near universal concern about
the cost of affording a first home. A YouGov poll for the Home
Builder's Federation conducted in April 2005 showed that 95% of
all respondents stated that people trying to buy their first home
find it financially difficult. [154]
2.2 This concern is borne out by the fact
that the number of first time buyers has been falling steadily
since 1999. First-time buyer transactions have declined from their
peak of around 50% of the market in the late 1980s to stand at
29% in 2004. [155]
2.3 The economic and social impact of a
shortage of first-time buyers is not confined to the mainly younger
generation of adults seeking to purchase their first home. The
scarcity of housing is creating an inter-generational problem.
The HBF/YouGov poll (2005) demonstrated that one fifth of homeowners
who bought for the first time in the last five years financed
the deposit with assistance from a relative. [156]A
survey for the Joseph Rowntree Foundation found that parents of
would-be home owners expect they will have to contribute an average
£17,000 of their own money so their adult children can purchase
their first home. [157]There
are now two million parents in the UK with children over the age
of 30 living at home. [158]
2.4 Perhaps the most significant social
impact will be the increasing divide between the home owning haves
and have-nots, particularly as a greater proportion of younger
families miss out on housing assistance but have limited opportunity
to purchase their own property. Recent figures compiled for the
Joseph Rowntree Foundation indicate that more than 1.25 million
younger households in England, Scotland and Wales earn incomes
that are too high to qualify for housing benefit if they were
living in "social" rented accommodation, but too low
to afford a mortgage on even the cheapest two-or three-bedroom
homes for sale in their area. [159]
2.5 A further constraint on the younger
generation of owner/occupiers from having a home that meets their
needs is a shortage of larger homes for them to own. Analysis
of census data by Professor Dave King of Anglia Polytechnic University,
commissioned by the HBF, revealed that people tend to retain the
same level of consumption of housing space as they grow older.
Occupation of the largest homes peaks around the age 45-54, but
as household size diminishes, eg when children leave home, people
stay put and rarely trade down from a home of "family size".[160]
2.6 There is a consequent danger that if
the supply of housing is constrained and planning policy favours
the building of smaller dwellings, the affordability of homes
suitable for families could be further exacerbated. The gap in
wealth between the better-off households in larger dwellings and
the rest of society could be further increased. This would have
an especially big impact on younger households. It could be argued
that today's young people will be the first generation for nearly
100 years who will not be able to aspire to more spacious housing
than their parents.
2.7 Space constraints could also lead some
couples to have fewer children, while overcrowding will tend to
rise if families are unable to trade up. The current problems
of overcrowding in social housing, where children have to share
a bedroom with their parents in almost three quarters of overcrowded
families could be translated to owner occupying families. [161]
2.8 Growing shortages of homes, and rising
relative prices of family homes, could make communities less sustainable
by squeezing out middle-income households, including many key
workers, leaving more polarized communities of the very poor and
the well off. [162]
3. The relationship between house prices
and housing supply
3.1 As in any market, there is an intrinsic
link between price, demand and supply. The total number of homes
built in the UK has been declining since the 1960s, while the
number of households is rising with an additional one million
households in England between 1996 and 2003. [163]Put
simply, as the supply of housing falls short of demand, prices
rise in real terms. One result is that while in 1984 the average
first-time buyer property cost just over £20,000; by 2004
a first time buyer property cost around £117,000. [164]Kate
Barker's Review established that the trend increase in house prices
over the last 30 years has been 2.4% per annum in real terms—significantly
greater than the European average of 1.1%.[165]
The problem is one of long-term trends and this requires a long-term
solution.
3.2 The only long-term remedy to ease price
inflation is to increase supply. This is not a short-term panacea,
but a steadying of the long-term relationship between supply and
demand. As Kate Barker concluded, in order to deliver a trend
rate in annual real house price increases of 1.8% an additional
70,000 houses each year in England might be required.
3.3 Affordability of housing will be eased
not only as price inflation in housing falls, but as macro-economic
wealth creation allows wages to increase and average price to
income ratios to fall.
4. Other factors influencing the affordability
of housing for sale including construction methods and fiscal
measures
4.1 The price of land is a significant and
growing share of the overall cost of new housing. A survey conducted
by the estate agents FPD Savills indicated that in 1992 the cost
of the land accounted for 15% of the price of a home. This had
more than doubled to 34% by 2003. [166]
4.2 This high cost of land reflects the
constrained supply of land for housing through the planning system.
It is vital, therefore, that the planning system can ensure sufficient
developable land is brought forward to satisfy the requirement
for housing if we are to meet both housing need overall and deliver
the full range of housing types required over time. Ensuring developable
land supply is adequate and flexible will also enable developers
to maximize creative market solutions for providing lower cost
homes for those who want them.
4.3 Modern Methods of Construction (MMC)
could potentially deliver efficiencies that would help contribute
to lowering the cost of new housing and improving overall affordability.
These benefits are, however, dependent on achieving sufficient
economies of scale. This in turn requires a steady and predictable
supply of developable sites available through the planning system.
Recent research by Michael Ball, Professor of Urban and Property
Economics at the University of Reading, shows that the stimulus
of higher volumes should have a dynamic positive effect on production
methods as well as improving productivity generally. [167]
5. The scale of the Government's plans to
boost housing supply
5.1 The Barker Review of Housing Supply
provides the most comprehensive analysis of house building for
60 years. Her conclusion that the current low rate of house building
is not a realistic option for the future is critical to finding
solutions to housing affordability.
5.2 Housing supply is currently running
far below demand. The number of households in England is expected
to grow by around 190,000 per year over the next 20 years, according
to Government estimates, yet housing completions over the last
five years have averaged less than 140,000 per year. This disparity
between supply and demand is unsustainable.
5.3 The Barker Review estimated that we
should be building an additional 70,000 to 120,000 private homes
per year in England, plus 17,000-23,000 extra social sector homes.
This scale, and the Government's acceptance of it, is right if
there is to be a long-term reversal of current affordability difficulties.
5.4 This scale of increased house-building
is environmentally sustainable. Kate Barker asserted that under
the extreme assumption that all new house building would take
place in the South East, her more ambitious scenario of 120,000
additional private homes each year would use about 0.75% of the
total regional land area over the next 10 years. [168]The
relatively small amount of land required is further illustrated
by the recent Policy Exchange report that argued it is a myth
that Britain is a small, overcrowded country. The report showed
that only around 8% of land in Britain is urban and asserted that
we live in crowded and dense cities, not a crowded and urbanised
country. [169]
5.5 New homes are already also significantly
more energy efficient than the existing stock. Building on this
record, the HBF is working with the Government to seek practical
and commercially viable means for further improving the environmental
performance of new homes in future.
5.6 The Government's manifesto commitment
to increase the number of home owners by one million over the
lifetime of this Parliament is ambitious. Changes in tenure, and
the greater implementation of shared ownership schemes should
help, but an increase in the supply of newly built homes is likely
to be essential if the target is to be met.
6. The relative importance of increasing
the supply of private housing as opposed to subsidised housing
6.1 Private builders are responsible for
building nearly 90% of all new housing, with most subsidised housing
being delivered through s106 agreements. The supply of private
housing and the role of private house builders is therefore critical
to housing provision across the board.
6.2 The long-term solution to easing housing
affordability is to achieve a better equilibrium between supply
and demand across all housing tenures. Supply therefore needs
to increase for provision across the market and for all types
of tenure.
6.3 In this context, while initiatives such
as Homebuy are welcome as a means of assisting those experiencing
particular issues in accessing the housing market, they can only
form a complementary part of the overall solution. Indeed, there
is a risk that without a sustained increase in overall housing
supply the injection of public money into such initiatives may
itself add to inflationary pressure in the housing market.
7. How the planning system should respond
to the demand for housing for sale
7.1 The planning system should do exactly
that—plan systematically for the provision of the housing
required—not be a means, as it too readily can be, of stopping
development.
7.2 Prior to the 2005 General Election,
the HBF published a manifesto entitled: "Meeting housing
needs and aspirations" which offered the following 10 recommendations
to ensure that the planning system allows enough homes to be built:
— The Government must make sure the
new planning system is faster and more efficient, as intended,
that adequate housing numbers are delivered, and that there is
not a serious supply hiatus of several years as the new system
is introduced.
— The Government must find more ways
to incentivise local planning authorities to deliver adequate
housing numbers.
— The immediate priority for the new
Government will be to undertake a review of PPG3. As Kate Barker
recommended, this must take a rigorous approach, be grounded in
an evidence base, with stakeholder panel scrutiny, and weigh up
policy costs and benefits.
— Regional and local planning authorities
must accept their full responsibilities for housing provision
and focus on delivering adequate housing numbers.
— Lack of infrastructure may delay
house building in some locations, notably the Growth areas, but
regional and local planning authorities should not be able to
use infrastructure as a general excuse for not delivering housing
numbers.
— Regional planning bodies must adopt
realistic and achievable regional housing targets and must set
realistic targets for local authorities.
— Local planning authorities must meet
their housing targets through adequate land releases and implementable
planning permissions.
— Five-year land availability studies
must be re-introduced, providing realistic assessments of what
can be delivered and highlighting shortfalls.
— "Plan, monitor and manage"
needs to have more emphasis on "manage"—responding
promptly to housing shortages.
— The appeals system needs to speed
up dramatically.
7.3 The HBF support the ideas set out in
the Government's recent consultation document "Planning for
Housing" as a means of addressing these requirements. A core
function of the planning system should be to ensure that an adequate
supply of developable land is made available to deliver agreed
levels of housing supply.
8. The scale of housing development required
to influence house prices and the impact of promoting such a programme
on the natural and historical environment and infrastructure provision
8.1 The Barker Review did not suggest that
increasing the supply of housing will significantly alter prices
in the short-term. Barker's goal is a better long-term equilibrium
between supply and demand and a greater degree of stability as
a consequence. Such equilibrium should ensure that value is maintained
for existing home owners, but as wages rise there is more opportunity
for new entrants, particularly the younger generation, to get
into the housing market.
8.2 As stated in Paragraphs 5.4 and 5.5
above, even the higher estimates of increased housing supply are
sustainable in environmental terms as well as contributing to
social and economic sustainability.
9. The regional disparities in the supply
and demand for housing and how they might be tackled
9.1 More efficient, flexible and predictable
planning processes are needed in all parts of the country to ensure
each region can deliver the housing supply it needs. It is vital
to have consistent planning policies to end the current stop/go
approach.
9.2 It is a false argument to suggest that
the solution lies in moving people from areas of high housing
demand, eg south east England, to areas of low demand, eg the
north of England. Housing underpins the success of local and regional
communities and economies. It is not viable or sustainable to
create housing where the local economy and community do not require
it. Failing to provide adequate housing where there is demand
for it will, however, have serious adverse social and economic
consequences both for the areas concerned and the country as a
whole.
149 "Housing policy: an overview" (July 2005)
HMT and ODPM pp25-26. Back
150
"Housing policy: an overview" (July 2005) HMT and ODPM
p24. Back
151
"Unaffordable Housing: Fables and Myths" (June 2005)
Policy Exchange p26. Back
152
"The Barker Review of Housing Supply", Final Report-Recommendations"
(March 2004) paragraph 1.46. Back
153
Council of Mortgage Lenders/MORI (2003) Annual Survey. Back
154
HBF/YouGov Poll (April 2005). Back
155
"Understanding first-time buyers" CML Research (July
2005) p3. Back
156
HBF/YouGov poll (April 2005). Back
157
Joseph Rowntree Foundation Survey June 2004. Back
158
Not so young forced to stay at home. Newsquest Media Group. 6
October 2005. Back
159
159 JRF: Limits to working households' ability to become home-owners
11 October 2005. Back
160
HBF "Room to Move", John Stewart (March 2005). Back
161
Shelter Survey October 2005. Back
162
HBF "Room to Move" John Stewart p 4. Back
163
"Housing policy: an overview" (July 2005) HMT and ODPM
p24. Back
164
"Understanding first time buyers" CML Research (July
2005) p15. Back
165
"The Barker Review of Housing Supply", Final Report-Recommendations"
(March 2004) Table A.1. Back
166
FPD Savills 8 September 2003. Back
167
CITB Construction Skills / HBF (8 September 2005). Back
168
"The Barker Review of Housing Supply", Final Report-Recommendations"
(March 2004) paragraph 1.46. Back
169
Unaffordable Housing Fables and Myths, Policy Exchange, June 2005
p 10. Back
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