However, with only 139,000 homes built in the year to 2016, reality continues to fall short of ambition, and even that ambition looks conservative. The Economic Affairs Committee suggests we’ll need closer to 300,000 a year if we are to tackle the UK’s housing crisis.
With construction targets left wanting, Osborne introduced a number of policies to encourage and support homeownership, tipping the scales away from the private rental sector. Landlords bore the brunt of a 3% increase on stamp duty for second homes announced in last year’s Autumn Statement, and will soon have to face a reduction to mortgage tax relief announced six months earlier at the 2015 Budget. Meanwhile, initiatives such as the Help to Buy scheme have improved affordability for aspiring homeowners, helping over 150,000 people buy a home.
But for all this tinkering, there’s little doubt that supply shortages lie at the heart of this crisis. We need more homes, and building them needs to be the main priority for Philip Hammond as he delivers his Autumn Statement this week. This needs to be a wholesale approach, not only starter homes for first-time buyers struggling to reach the first rung of the housing ladder, but also social housing and build to rent. Planning departments up and down the land are severely under resourced so as well as relaxing planning regulations, they also need to benefit from investment.
Rent remains the most significant drain on an aspiring homeowner’s ability to save for a deposit, so limiting the size of the private rental sector, and inflating rents as a result, is simply not conducive to greater homeownership. The government could help long-term tenants if it were to work with regulators to create a new framework for interest-only mortgages. Regulation introduced in 2014 saw lenders substantially withdraw from this market, however with tenants now facing a lifetime of renting, surely it is time to reflect on whether there could be an argument that this creates more consumer detriment than it avoids?
For those living in the more expensive parts of the UK, it may be the only feasible finance option for first-time buyers who may see very little difference between the cost of renting and that of servicing a mortgage. Controlled expansion of interest only lending will allow potential homeowners the possibility of having their own roof over their heads, be cheaper than renting, and allow them to create an asset.
Housing policy also needs to address demographic change in the UK. People are buying their first house later in life, retiring later and living longer, yet many in later life can still face obstacles when seeking a mortgage. Older generations hold a disproportionate amount of wealth and, in general, are more financially stable than the average 30-something first time buyer, so, if supported by appropriate policy, could help to unlock property chains and create greater liquidity in the housing market.
All that said, the housing crisis is fundamentally a disease caused by insufficient supply of new properties. In the short term, the industry could, subject to regulation, address the symptoms of the problem through measures aimed at easing access to finance for would-be borrowers, but first and foremost we need to see a shift in mind-set from those in charge, and a step-change in house building across all sectors, if we are to find a long-term cure.
