Building more homes Contents

Chapter 2: The Government’s response

73.The present Government has launched a number of initiatives in the housing market, many aimed at increasing home ownership. This chapter will consider the Government’s plan to build one million homes by 2020 and its focus on owner occupation whilst doing little to expand the supply of rented or social housing.

Housing supply: building one million homes

What is the Government’s target?

74.The number of homes the Government has committed to build has evolved. The Conservative Party’s Manifesto did not contain a clear overall target for house building.79 The Manifesto pledged to:

“build 200,000 quality Starter Homes over the course of the next Parliament, reserved for first-time buyers under 40 and sold at 20 per cent below the market price. [ … ] We will [deliver] 275,000 additional affordable homes by 2020. And we will offer 10,000 new homes to rent at below market rates.”

75.In an interview in September 2015, the Minister for Housing went further and stated that the Government aimed to build one million homes during the course of the Parliament.80 This target includes all new homes built and not just ‘affordable homes’. The Minister in evidence to the Committee explained that:

“Originally when I had the conversation about this, I was asked by a journalist, ‘What would you see as success?’, and I think it would be that.”81

76.In his Spending Review and Autumn Statement of 2015 the Chancellor set out a five point plan for home ownership and promised to build 400,000 ‘affordable homes’ by 2020.82

Is one million homes the right target?

77.Ministers explained that they had arrived at their “very ambitious” target after consideration of the household formation statistics.83 The household formation data are the primary, but not the only, way to measure the need or demand for housing. The evidence we heard on these projections is set out in Chapter 1.

78.The Government’s aim to build one million homes, or 200,000 a year, was criticised by some witnesses.

79.First, witnesses argued that the Government should consider not just current housing requirements, but also the backlog created by the failure to build enough homes over many years.84 Between 2011 and 2015 only 54 per cent of the homes required to meet the household formation projections were built.85 Chris Walker of Policy Exchange estimated there was a housing shortage “in the order of one million homes”.86 This shortage is reflected in the level of house prices and rents, in particular in London, even before the collapse of housebuilding after the financial crisis.87

80.Second, the Government’s target would not be sufficient to alter the rate of increase in house prices materially. HM Treasury told us that even if one million homes were built by 2020, house prices would rise by five or six per cent a year over the same period.88 The Government accepted the number of houses “necessary to stabilise house prices would be very substantial indeed.”89 The Minister for Housing admitted that “an awful lot of existing home owners will be very pleased” that prices will continue to rise and thought that was “an entirely human approach to take”. The Government’s aim is not to stop house prices rising, rather their priority is to encourage home ownership without cost to existing owners.90

81.In addition to rising prices, the rate of house price growth currently exceeds the rise in incomes. Building 200,000 homes a year to 2020 is also not in itself enough to modify the price to income ratio. The Exchequer Secretary to the Treasury told us that:

“The modelling suggests that in order to keep the house prices to earnings ratio constant, somewhere between 250,000 and 300,000 homes per year need to be built.”91

Can one million homes be built by 2020?

82.We asked Ministers and officials for a more detailed analysis of how the target of one million homes by 2020 will be reached, based on the Government’s estimate of how much each sector has the capacity to contribute. In response to this question the Minister for Housing and DCLG provided the table set out in Table 4 below:92

Table 4: Government’s breakdown of new housing supply


Delivery (units)

Help to Buy: Shared Ownership

135,000 starts

Starter Homes

200,000 starts

Affordable rent

100,000 starts

Home Building Fund


Public Sector Land programme

Release land for 160,000

Large scale developments (Ebbsfleet, Bicester, Brent Cross, Northstowe, Barking Riverside)


Estate Regeneration


Help to Buy Equity Loan extension 2016–17 to 2020–21

Support 145,000 families into new-build homes


521,00 units

160,000 land capacity

145,000 supported into new homes

Source: Written evidence from Brandon Lewis MP (EHM0167)

83.The Government’s figures do not fully address the question asked:

(a)It is a list of the projected outputs from various Government initiatives; not all this output is intended to be achieved by 2020.

(b)The figures double count the homes to be supplied, for example Starter Homes will be built on public land.93

(c)The Government does not indicate how many homes each sector will build, or in particular how many the private sector will contribute without support from these initiatives.94 In response to the Committee’s concern, the Minister told us that the Government “does not publish forecasts of housing supply” by the private sector.95

(d)The figures do not provide information on how many homes will be complete and ready for occupation by 2020.96 For example, the Government has yet to build any Starter Homes despite these properties accounting for one fifth of the overall target.

Housing supply target: conclusions

84.The Government’s target of one million new homes by 2020 is not based on a robust analysis. To address the housing crisis at least 300,000 new homes are needed annually for the foreseeable future. One million homes by 2020 will not be enough.

85.To achieve its target, the Government must recognise the inability of the private sector, as currently incentivised, to build the number of houses needed. Government action is required to address this, including helping local authorities and housing associations to increase their housebuilding.

Tenure: doubling the number of first time buyers

Policy on housing tenure

86.One of the Government’s election promises was to help one million more people into home ownership by doubling the number of first time buyers.97 The Minister for Housing acknowledged the Government’s “focus” on home ownership, but told us that that the Government also wished to increase the number of homes available to other tenures.98

87.The Minister for Housing pointed out that home ownership remains the tenure of choice for the majority of the population. He cited figures from the 2011/12 British Social Attitudes Survey which reported that 86 per cent of households would prefer to own their home.99 Currently only 62 per cent of people do own a home. This is the lowest level of home ownership since 1985 and down from a peak of 71 per cent in 2003.

88.The Exchequer Secretary to the Treasury pointed out that as well as the general decline, there is a widening generational gap in homeownership and that the decline was “particularly acute the further you go down the age scale”.100 Figure 9 illustrates this trend.

Figure 9: Trends in home ownership by age group. Percentage of each age group that are home owners, UK, 1981 to 2012

Stacked line chart showing trends in home ownership by age group and percentage of each group that are home owners in UK from 1981 to 2012

Source: ONS, Housing and home ownership in the UK, January 2015: . Data from: English Housing Survey 2012 to 2013, Table FC2101: English Housing Survey 2001/02, Table S106: [accessed June 2016]

89.To achieve its aims, the Government has announced a series of policies designed to increase home ownership.101 Chris Walker of Policy Exchange saw these schemes as representing a shift of emphasis from subsidising rents to subsidising home ownership, pointing out: “for the first time more grant money will be spent on affordable home ownership products than on affordable rented or social rented products”.102

Criticism of the Government’s approach

90.Some witnesses were concerned that the Government’s focus on home ownership was to the detriment of other tenures. They considered that the Government’s policies have targeted buy-to-let landlords, undermined investment in the private rental sector through taxation changes, and exacerbated the undersupply of social and affordable rented accommodation.

Trends in the private rental sector

91.As shown by Figure 10, the number of households in the private rented sector has risen. One factor in this trend is the long-term decline in those living in social housing. Jon Cunliffe, Deputy Governor of the Bank of England, said that this trend had both short and long-term causes:

“Demographic and other factors have increased the demand for rented accommodation, so the balance between owner occupier and rented has been changing over the last 15 or 20 years, but it looks as if much of that change happened in the period before the crisis, and a lot more of the switch between owner occupied and rented since the crisis has been due to affordability.”103

Figure 10: Trends in tenure by household in England and Wales (percentage of households in each tenure 1961–2013/14)

Stacked column chart showing trends in tenure by household in England and Wales expressed in percentage of households in each tenure from 1961 to 2013/14

Source: DCLG, English Housing Survey, Household Report, July 2015, Chapter 1, annex table 1.1 [accessed June 2016]

92.The evidence we received on conditions in the private rental sector was mixed. The English Housing Survey indicates that levels of satisfaction with their tenure among private sector tenants has risen from 46 per cent in 2003/04 to 53 per cent in 2013/14. These figures are still below tenure satisfaction levels in 2013/14 of owner occupiers (94 per cent) and social housing tenants (80 per cent).104

93.Some witnesses, in particular groups campaigning for tenants, argued that the sector “as it is currently constituted is really not fit for purpose for huge numbers of people” due to increasing rents, poor conditions and insecurity of tenure.105

Government policies on buy-to-let

94.The Government has announced a series of policies which they consider redress an imbalance between buy-to-let landlords and first time buyers. These include:

95.The Exchequer Secretary to the Treasury told the Committee these changes were about fairness:

“We want to make sure that more property is available to first-time buyers and young people. It is fair that the treatment of buy-to-let property should come closer to what it would be if you were invested in equities.”110

96.Whilst the number of individual buy-to-let landlords has increased,111 witnesses questioned whether they were “squeezing out” first time buyers.112 Stephen Noakes of Lloyds Bank pointed out that between 2011 and 2015, first-time buyer numbers increased by 60 per cent: “The first-time buyer market has grown quite substantially over that period”.113

97.The Council for Mortgage Lenders predicted that the overall impact of the changes would be “to increase the cost and limit the availability of private rented sector homes”.114

98.We are also concerned that these recent changes, in particular the higher rate of stamp duty land tax, could hinder the development of a build to rent sector. Investors argued a flourishing build to rent sector could ameliorate some of the perceived problems in the private rental sector by supplying high quality homes and providing greater security of tenure.115 We were told that an estimated £30 to £50 billion could be available from institutional investors to invest in the private rental sector.116 However, the British Property Federation stated that if the stamp duty increase was to apply to institutional investors “we may as well forget it” as the “institutional money has lots of places to invest.”117

Supply of social and affordable rented housing

99.The Government insisted that they wished to increase housing supply generally, including the supply of ‘affordable housing’ to rent.118 Nonetheless, the Government’s policies to increase home ownership, in particular the extension of the Right to Buy and Starter Homes, directly conflict with this goal.

Extension of the Right to Buy to housing associations

100.The long-standing policy of allowing council tenants to purchase their homes at a discount has resulted in a decrease in the overall stock of social housing as the homes sold have not been replaced.119 Concern remains that the homes which will be sold under the extension of the Right to Buy to housing association tenants will not be replaced on a like-for-like basis. The replacement homes which are built may not be in the same area, of the same size, or of the same tenure.120

101.The extension of the Right to Buy will be funded by the sale of high value council properties.121 Liverpool City Council thought that this sale of high value stock would only “exacerbate” the shortage of social housing.122

Starter Homes

102.Revisions to planning have extended the definition of ‘affordable housing’ to Starter Homes. As part of granting planning consent, builders agree to construct, or pay for the construction of, ‘affordable homes’. Previously, these were (very broadly) only homes for affordable rent and shared ownership. The agreements therefore ensured a supply of homes for rent to those on low incomes.123 The inclusion of Starter Homes means that these agreements will now prioritise homes for private sale.

Box 2: Types of ‘affordable housing’

Prior to the inclusion of Starter Homes, the three types of housing within the National Planning Policy Framework definition of ‘affordable housing’ were:

  • Social housing: this is housing owned by local authorities and housing associations, for which guideline target rents are determined through a national rent regime.
  • Affordable Rented housing: these are properties provided by local authorities or housing associations to households who are eligible for social rented housing.124 The main difference between Affordable Rented homes and social housing is the method by which rents are set: Affordable Rent is required to be no more than 80 per cent of the local market rent. In practice this is generally higher than a comparable social rent.
  • Intermediate housing: these were homes for sale (for example through shared ownership) and rent provided at a cost generally above social rent, but below market levels. For of rented accommodation rents are usually about 80 per cent of the market rent.

103.The concern of witnesses was that the overall result will be fewer homes for social and Affordable Rent being built and a consequent reduction in the number of homes available for tenants on a low income.125 Starter Homes will not remain affordable in perpetuity.126

Conclusions on Tenure

104.The Government has chosen to promote the expansion of owner occupation. This reflects the aspiration of many people to own their home. However, it must be recognised that home ownership, whilst a wish for many, is not achievable for all.

105.The Government’s focus on home ownership neglects other tenures; those on the cusp of ownership are helped and those who need secure, low cost rental accommodation are not. Opportunities to increase investment and funding in the private rental sector are potentially undermined by policies designed to assist owner occupation.

79 The Conservative Party, Manifesto 2015: [accessed May 2016]

80 Interview for BBC Inside Out broadcast 21 September 2015: . Mr Lewis stated: “By the end of this parliament, success I think would mean that we have seen a build in total of something like a million homes”. The target was repeated at the launch of the Housing and Planning Bill (DCLG, ‘Historic Housing and Planning Bill will transform generation rent into generation buy’, 13 October 2015: [accessed May 2016]

81 Q 237 (Brandon Lewis MP)

82 HM Treasury, Spending Review and Autumn Statement, Cm 9162, November 2015: [accessed April 2016]

83 Q 237 (Brandon Lewis MP). The evidence and our analysis of how the Government’s target compares to the household formation statistics is considered in Chapter 1.

84 Q 1 (Dame Kate Barker)

85 Neil McDonald and Christine Whitehead, ‘New estimates of housing requirements in England, 2012 to 2037’, Town and Country Planning, Nov 2015: [accessed April 2016]

86 Q 1 (Chris Walker)

87 The Institute of Economic Affairs wrote, “housing costs in the UK—both house prices and rents—are among the highest in the world, both in absolute terms and relative to average incomes. Since 1970, average house prices in the UK have gone up four and a half fold after inflation. In this, the UK is an extreme international outlier.” Written evidence from the Institute of Economic Affairs (EHM0120).

88 Q 76 (Stephen Farrington). Mr Farrington’s evidence was based on the OBR forecasts. The Minister for housing confirmed that “building 1 million homes will not necessarily reduce house prices” Q 239 (Brandon Lewis MP).

89 Q 63 (Stephen Aldridge)

90 Q 239 (Brandon Lewis MP)

91 Q 239 (Damian Hinds MP); see also Q 1 (Chris Walker and Dame Kate Barker). Due to low interest rates building 250,000–300,000 homes above may now be insufficient to keep the price: earnings ratio constant.

92 Written evidence from Brandon Lewis MP (EHM0167); see also supplementary written evidence from DCLG (EHM0157).

93 Supplementary written evidence from DCLG (EHM0157). The Department noted that this double counting meant that “the total number of units that will be delivered by these programmes will be lower than the sum of the units provided by each.”

94 The industry has stated that they expect to increase supply but many of the additional units will be built with the support of the initiatives listed above—and equally some market homes will not be built because some demand will have been satisfied through the government supported initiatives.

95 Written evidence from Brandon Lewis MP (EHM0167)

96 For example: it is claimed that Starter Homes will make the largest single contribution (200,000 building starts), but work on building Starter Homes is yet to commence. A consultation on the regulations underlying Starter Homes closed on 18 May 2016. DCLG, Starter Homes Regulations: technical consultation, March 2016: [accessed April 2016].

97 The Conservative Party, Manifesto 2015, op. cit.

98 Q 249 (Brandon Lewis MP)

99 NatCen Social Research, British Social Attitudes 2011–12, 2012: [accessed April 2016]

100 Q 244 (Damian Hinds MP)

101 Annex 3 contains full details of each scheme.

102 Q 9 (Chris Walker)

103 Q 198 (Jon Cunliffe)

104 The English Housing Survey asks people if they agree that their form of a tenure is a “good way of occupying a home”, English Housing Survey 2013–14, Comparison of Tenure Groups: [accessed June 2016]

105 Q 17 (Toby Lloyd); see also written evidence from Renters’ Rights UK (EHM0050); see also Professor Danny Dorling who claimed that an increasing number of families with children lived in the private rented sector with “minimal security” (Q 50).

107 HM Treasury, Spending Review and Autumn Statement, Cm 9162, November 2015: [accessed April 2016]. After consultation, the Government said it would not exempt corporate landlords as it had initially planned.

108 HM Treasury, Budget 2016, HC 901, March 2016: [accessed April 2016].The higher rate of capital gains tax was reduced from 28 to 20 per cent, and the basic rate from 18 to 10 per cent from 6 April 2016. There is an eight per percentage point surcharge on the new rates for gains on residential property.

109 Ibid.

110 Q 244 (Damian Hinds MP); see also Q 14 (Dame Kate Barker)

111 Professor Tony Crook told us that “The PRS has become increasingly dominated by individual landlords: In England the proportion of all PRS dwellings owned by individuals has risen from just over half in 1976 to over seven in ten by 2010” Written evidence from Professor Tony Crook (EHM0090).

112 Introducing the changes in the Autumn Statement 2015, the Chancellor stated: “Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy. So I am introducing new rates of Stamp Duty that will be 3 per cent higher on the purchase of additional properties like buy-to-lets and second homes.” HM Treasury, Spending Review and Autumn Statement, op. cit.

113 Q 87 (Stephen Noakes)

114 Written evidence from the council for Mortgage Lenders (EHM0064). The Committee also received a number of submissions from individual buy-to-let landlords outlining the impact of the changes on their businesses.

115 Nick Jopling of Grainger PLC and Chris Taylor of the British Property Federation stated that institutional investors were in a position to offer tenants longer leases (Q 222 and Q 216); see also Q 59 (Andrew Rose) and written evidence from the Greater Manchester Combined Authority (EHM0135).

116 Written evidence from the British Property Federation (EHM0133)

117 Q 225; at the time this evidence was given the increase only applied to landlords with fewer than 10 properties. This was changed in the March 2016 budget to apply to all residential landlords. HM Treasury, Budget 2016, op. cit.

118 Q 237 (Brandon Lewis MP). For the Government’s definition of ‘affordable housing’ see Box 2 below.

119 Q 22 (Toby Lloyd), written evidence from the London Tenants Association (EHM0099) and Q 11 (Martin Wolf)

120 Q 118 (David Orr), written evidence from Greater Manchester Combined Authority (EHM0135) and written evidence from the City of London Corporation (EHM0119)

121 Housing and Planning Act 2016, Chapter 1

122 Written evidence from Liverpool City Council (EHM0039); see also Q 129 (Cllr Sue Derbyshire) and written evidence from Bolton Parish Council (EHM0040)

123 These agreements are made under section 106 of the Town and Country Planning Act 1990, see Chapter 3 for full details of this section.

124 These are part of a programme provided under the Affordable Rents regime completed in 2015 or dwelling that the housing association chooses to transfer from social rented housing when the property becomes vacant. DCLG, Guidance on Rents for Social Housing, March 2014, p 11: [accessed April 2016].

125 Q 117 (David Orr); see also written evidence from Greater Manchester Combined Authority (EHM00135) and written evidence from the London Borough of Islington (EHM0141)

126 The Government initially proposed that Starter Homes could not be sold at full market value for a ‘restricted period’ of five years after purchase. In technical consultation in March 2016 the Government sought views on “on a tapered approach which enables the starter home to be sold at an increasing proportion of market value, stepping up to 100% over time”. The Government indicated that it did “not support extending the restricted period beyond the first 8 years of occupation”. DCLG, Starter Homes Regulations: technical consultation, March 2016: [accessed April 2016].

© Parliamentary copyright 2016