Latest Public Sector News

08.05.17

Market-led model ‘failing to deliver’ affordable housing

The current housebuilding system is “too slow” and the rate of delivery of new homes is a “major problem” for the government to address, a leading think-tank has said.

In its report called ‘Building Homes Faster? A Commentary on the government’s plans for increasing the pace of development’, think-tank Civitas argued that the current housebuilding model means that builders can only construct property as quickly as they can sell them at current house prices or above.

This is something which limits for-sale housebuilding output, which has been in long-term decline as house prices continue to rise across the country.

The report explains: “The problem lies in the price that is paid for the land, which is calculated on the basis of current house prices. This locks the developer into a conservative build rate which cannot exceed the rate at which people are able to buy new homes at current market prices. A site of 1,500 homes may then be built at a rate of 80-90 homes a year, for example, the development taking 15-20 years to complete.

“This is a function of a planning system which grants permissions with no obligation on the landowner or developer to build any more quickly than the rate that will secure the maximum return. This virtually guarantees that developers will bid up the price of land to values at which conservative build rates are necessary.”

To tackle this, Civitas researchers suggested diversifying the market with a wide range of providers including SME builders and using off-site construction techniques, something that is promoted in the government’s white paper as a way of increasing competition.

Importantly, Civitas underlined the need for a new framework to enable developers to sell homes more cheaply, build more quickly and then purchase land at lower prices.

The need to make homes more affordable through giving buyers greater purchasing powers was also raised in the report – a measure which is being addressed by government Help to Buy schemes.

“The current market-led housebuilding model is failing to deliver,” said Daniel Bentley, author of the report and editorial director at Civitas. “Despite a growing crisis of affordability, homes are only usually built at a rate that will not depress current prices. This restricts output and keeps prices high.”

Bentley added that if the government wants to ease the housing crisis, it needs to find a way of delivering homes much more quickly and in a way that bears down on current prices, “restoring affordability for the hundreds of thousands of young people who are being priced out of the market each year”.

The report also follows numerous warnings about the current failings of the housing market that is not delivering enough affordable homes for residents in the UK. Last week, the CLG committee called on changes to the council borrowing cap to stop large volume homebuilders having a monopoly over the market and driving up prices.

And at the end of April, MPs on the PAC committee slammed the government for lacking ambition in trying to find a solution to the UK’s housing crisis.

Top Image: Rui Vieira

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Comments

Shar Roselman   08/05/2017 at 11:57

The easy solution is to grant and indeed force planning authorities permission to create significant obligations on developers to build much more quickly than the rate that will secure the maximum return. This will force down the price of land, will naturally bring in smaller builders as large developers struggle to complete sites, and will solve what is the biggest problem in preventing new homes being built.

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