The Built Environment Committee’s Meeting Housing Demand report concluded that “too many people currently live in expensive, unsuitable, and poor-quality homes and housing supply needs to be increased to tackle the housing crisis now.”
The report looked at social housing, private tenancy and owner occupancy.
It said while many commentators were generally in favour of interventions to support home ownership in challenging market condition, they emphasised the need for an overall increase in housing supply to reduce the need for public funds and to “prevent subsidised home ownership from adding to house price inflation”.
It said spending on the Help to Buy scheme was expected to reach £29bn in cash terms by March 2023. The National Audit Office said the spend on the scheme had resulted in the overlooked opportunity to put this money towards house building.
While the Home Builders Federation told the committee that the Help to Buy scheme created demand and led to investment in land and labour to deliver homes, Professor Christian Hilber, professor of economic geography at the London School of Economics and Political Science, conducted analysis which showed homes were primarily being built in locations where it was easy to construct, such as the near the English-Welsh border.
Hilber added that in areas where “jobs are located and housing is severely supply constrained (such as in Greater London)” the scheme has “led to a substantive increase in house prices, with no statistically significant effect on construction numbers.”
Affordability and ownership desires
The report said owner occupancy was the most popular form of tenure with 87 per cent of people preferring to own their home compared to 12 per cent who would rather rent.
It also found home ownership among those aged 25-34 had declined over time. In 2003/4, 59 per cent of households were owned by people in this group but by 2019/20 this had fallen to 41 per cent.
The committee put this down to the increase unaffordability of home ownership, citing the rates at which house price growth had outstripped wage growth. As of 2020, someone on a median average salary of £31,000 in England would expect to pay 7.7 times their earnings to purchase, compared to a ratio of 3.5 in 1997.
The report also noted the discrepancy of affordability between regions. London as found to be the most expensive area with workers having to pay 11.8 times their earnings, compared to those in the North West where 5.8 times their earnings would be needed.
The report said tightened mortgage lending rules also impacted affordability, which was explored in the House of Lords 2016 report ‘Building More Homes’.
Supporting housebuilding
The report said the role of SMEs in housebuilding had “collapsed” and to address this, planning risk should be reduced, more small sites should be made available and access to finance should be greater.
Baroness Neville-Rolfe, chair of the House of Lords Built Environment Committee said: “The government’s ambitious target of 300,000 new homes per year will only be met if government takes action to remove the barriers for housebuilders, particularly for SMEs who 35 years ago built 39 per cent of new homes but now build just 10 per cent.
“The planning system needs urgent reform.”
She added: “Skills shortages in the construction, design and planning sectors must be addressed to unlock the required development, including the green skills needed to address climate change.
“Uncertainty and the absence of a clear policy direction has only exacerbated housing problems. Our report provides a package of proposals to help deliver much needed housing and address the critical undersupply of new homes.”
The full report can be found here.
