Executive Summary
“We are … very conscious that we have not built enough homes in this country year on year for many decades … We have been very clear that we want to be very ambitious. We want to deliver homes across all tenures. We want to drive home ownership up as well. Working to deliver one million homes in this Parliament is a target we should be very ambitious about, and go beyond, if we can.” Brandon Lewis MP, Minister for Housing, 22 March 2016.1
A growing population, rising immigration and rising incomes have increased demand for housing in England in recent decades.2 But, as the Minister admitted, too few homes have been built over this period. House prices and rents in some parts of England have risen sharply. There has been a decline in home ownership over the past decade. This, coupled with the decline in the number of homes available in the social sector, means that an increasing proportion of people are now housed by private landlords.
We must build enough homes to make housing more affordable for everyone—to rent or to buy. Aspirant home owners who are unable to afford a deposit pay substantial proportions of their income on rent; families on waiting lists for social housing contend with insecure tenancies and rogue landlords while spending on housing benefit has almost doubled in real terms over the last two decades.
As the Minister explained to us, the Government is aiming to address problems in the housing market by building one million homes in England by the end of this Parliament while also helping people into home ownership through various schemes.
Since the referendum on the UK’s membership of the European Union in June 2016, the Minister has effectively abandoned this target. Prior to the vote he warned that the target would be difficult to achieve if the UK voted to leave the European Union. 3
On 1 July 2016, the Chancellor of the Exchequer effectively abandoned his target of achieving a budget surplus in 2019/20. This could pave the way for releasing restrictions on local authorities and enable them to boost housebuilding activity substantially as this report recommends.4
The Government’s ambition is welcome but this must be matched by appropriate action on a much larger scale than currently envisaged and across all tenures. The Government is primarily focused on building for home ownership, neglecting housing for affordable and social rent.
It has been ten years since 200,000 homes (the implied annual rate from the Government’s target) were added to the housing stock in a single year. But the evidence we have heard suggests this will not be enough to meet future demand and the backlog from previous years of undersupply. To meet that demand and have a moderating effect on house prices, at least 300,000 homes a year need to be built for the foreseeable future. Otherwise the average age of a first time buyer will continue to rise.
In a functioning market, the private sector, housing associations and local authorities would be building enough to meet anticipated demand. But they are not. The business model of the large developers looks to profit margins rather than volume, housing associations are facing loss of revenue due to Government policy on social rents and local authorities, despite some having the appetite, are not in a position to finance large housebuilding programmes.
If the Government is serious about its desire to build more houses across all sectors, it should relax the arbitrary limits on how much local authorities are able to borrow to build social housing. There is no set limit on the amount a local authority can borrow to build a swimming pool, the same should apply to housing. The Government should also provide financial support and flexibility for local authorities to enter into partnerships with housing associations and institutional investors. A sustained increase in local authority housebuilding can take advantage of historically low long-term funding rates, deliver a consistent supply of new homes across the economic cycle and bring much needed competition to oligopolistic large building firms which dominate the housebuilding market.
A major source of land for housebuilding is land that is publicly owned. We welcome the Government’s recognition of this, but efforts to release surplus land have been ineffective so far. The Government should make far more public land available for housing and give a senior Cabinet minister responsibility for the delivery of the programme, with support from the National Infrastructure Commission.
To stimulate building in the private sector, the Government should address the large gap between the number of planning permissions granted and the number of homes actually built. To penalise hoarders of permissioned land, local authorities should be granted the power to levy council tax on developments that are not completed within a set time period. To ensure local planning departments are adequately resourced, local authorities should be able to set and vary planning fees that are charged. The whole planning process should be simpler, more transparent and more helpful to small builders.
The Minister told us that the Government is “very ambitious” about its housing policy. By implementing the recommendations in this report, the Government will show it has the political will to meet that ambition.
2 As housing is a devolved matter, this report concentrates on England only. The problems highlighted and the solutions offered however could equally apply to other areas of the UK.
3 Mr Lewis told a Housing Conference: “I don’t set targets, I never set a target”. Inside Housing, Lewis: million homes ‘was never a target,29 June 2016: http://www.insidehousing.co.uk/lewis-million-homes-was-never-a-target/7015848.article [accessed July 2016]
4 In a speech to the Greater Manchester Chambers of Commerce on 1 July 2016, the Chancellor said: “The Government must provide fiscal credibility, so we will continue to be tough on the deficit, but we must be realistic about achieving a surplus by the end of this decade. This is precisely the flexibility that our rules provide for.”