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Government report on ‘broken housing market’ promises raft of measures to solve undersupply

by: Tim Chen
  • 12/10/2017
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Government report on ‘broken housing market’ promises raft of measures to solve undersupply
In response to a Select Committee report released Oct 11th, the government has acknowledged Britain’s “broken housing market” and promised to opening it up to small-to-medium sized building firms, invest in build-to-rent, embrace innovation and prioritise the rights of EU nationals who can bridge the skills gap in construction.

The government’s response was a reply to a House of Commons Communities and Local Government Committee report, published in April 2017, regarding capacity in the home building industry.

In the response, the government acknowledged that Britain’s “broken housing market is one of the greatest barriers to progress in Britain today.”

“For 30 or 40 years we simply haven’t built enough homes. As a result, the average home now costs almost eight times average earnings.”

The government said that “fundamentally, we need to build many more houses in the places that people want to live,” and pledged to deliver “one million homes by 2020 and a further 500,000 homes by 2022.”

With Britain’s 10 largest developers building around 60% of new private homes, and the number of home delivered by SMEs reduced from 44,000 in 2007 to 18,000 in 2015 — the government conceded that the “current financial model and the structure of the wider market does not deliver the homes we need.”

The strategy to address the failing construction model will be to “diversify the housing market, opening it up to smaller builders and those who embrace innovative and efficient methods.” Adding that “the government is committed to helping SME companies to grow their business and contribute more to housing supply”

Referring to the Housing White Paper published in February, the government emphasised the importance in continuing to “support new investment in Build to Rent.” Saying that it is “clear that we want to see Build to Rent continue to grow and make a significant contribution to housing supply.”

Saying that they’ve already made progress, the government cited evidence such as the launching of the Housing Infrastructure Fund (HIF) this July, a grant program with up to £2.3bn to deliver up to 100,000 new homes in “the areas of greatest housing demand”.

The paper also mentioned efforts to diversify housing supply with the Affordable Homes Programme (AHP) which represented a £1.4bn investment that has delivered nearly 333,000 “affordable homes” since 2010, which includes 240,000 homes for rent — the government also said that it increased the current affordable homes budget to around £9bn.

Despite increases in public investment, however, the paper stressed that “ongoing private investment will be essential to improve productivity,” noting that the construction industry “has a key role to play both in training future workers and investing in innovation in supply chains.”

The difficulties over using traditional methods of construction to meet modern housing needs was also acknowledged: “To increase housing supply, we need a diversified housing market where all firms embrace innovation to become more productive and deliver a better product to the consumer – building more homes using modern methods of construction would be a part of this.”

The implications of Brexit on the housing market was also addressed. Replying to the Select Committee’s recommendation that the “importance of EU labour to the construction industry should be taken into account… in setting priorities for Brexit negotiations.” The government said that: “EU nationals make an important and valuable contribution to life in the UK, and Government is seeking an early agreement on the rights of EU nationals in the UK on a reciprocal basis.We have made this a priority for our negotiations.”

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