Is the government’s house building target achievable?

Is the government’s house building target achievable?

James Shelley examines the issues that could derail delivery of the government’s housebuilding target.

The government’s pledge to build 300,000 new homes by the mid-2020s has been welcomed, yet there are concerns over whether it can be achieved due to a broken planning system.

A report by the Public Accounts Committee says there is neither a clear rationale for the ambitious target nor a detailed plan and points out that the Ministry of Housing, Communities and Local Government does not have the required mechanisms in place to achieve it. The Planning Inspectorate has also come in for criticism, as it now takes 38 weeks on average to determine a housing appeal, compared to 30 weeks in 2013.

Whilst the Ministry wants residential development to be led by local plans, under-resourcing means that councils are not drawing up the complex plans that indicate how they will satisfy demand for additional homes in their area. With the Local Government Association (LGA) predicting that local authorities will face a funding gap of £8 billion by 2025, the situation is unlikely to improve without further stimulus.

The last time UK housebuilding reached levels of 300,000 a year was 1977-78 when councils were responsible for 44% of them. The LGA believes that a ‘genuine renaissance in council house building’ will help to get things back on track. The Ministry is aware of the challenge and is giving councils an additional £44 billion. This, along with planning system reforms designed to free up more land and removing the cap on what councils can borrow to build new homes, are steps in the right direction.

On the question of supply, the Federation of Master Builders (FMB) says that allocating small sites for housing in local plans would, at a stroke, reduce uncertainties for small housebuilders and speed up housing supply through better diversification. The big issue, however, remains finance. Despite improvements during the last couple of years, the loan to cost ratio from most lenders remains unviable, yet small housebuilders could increase output by 38% if they could achieve a loan to value/cost ratio of 80%. They have therefore called on the government to work with the finance sector to improve lending.

The housing shortage has arisen over decades, as successive governments failed to build to meet growing demand, and will not be resolved overnight.

Download Wakemans Vision – August 2019