Prince Charles, acting as the Queen’s consort, laid out the government’s legislative agenda for the upcoming parliament session, a tradition that dates back to 1963.
Planning system reform, along with reforms to the rental sector were among the 38 pieces of legislation mentioned, however, those in the property sector have said that further detail and clarification was lacking.
Stuart Law, chief executive at Assetz Group, said that a “notable omission” was the “lack of a clear and comprehensive approach to planning reform”.
He added that it was known that future legislation should include local design codes and reform as to how developers would contribute to community infrastructure, which could help “streamline and rationalise the process” and improve cashflow.
Law continued that it is vital that new developments are “sensitive to, and enhance local communities”, but local design codes could “add yet another hurdle for housebuilders to jump.” He also noted that high construction costs, the energy crisis, and long-term impacts of Brexit and Covid-19 were already negatively impacting housebuilders, so redundant legislative barriers need to be removed so it’s not “harder for them to grow their business”.
However, he believes that SMEs are “best placed” to navigate the local design code system due to their unique local knowledge and experience.
Law said that Assetz would have to wait and see what future legislation looked like, but it doesn’t look like reforms will be “nearly radical enough, or being progressed with enough urgency, to help tackle the major challenges housebuilders face, or deliver significant numbers of new homes to meet demand and moderate price growth”.
He added that if issues are not tackled more comprehensively then current market dynamics would become “unsustainable” as people are locked out of the housing market and the number of SME housebuilders could continue to fall.
“A perverse game of cat and mouse” for first time buyers
Karen Noye, mortgage analyst at Quilter, said that whilst there are some plans to address the housing and rental market, none of them “truly tackle the root cause the problem”, which is lack of housing stock.
She explained that first-time buyers had been “playing a perverse game of cat and mouse” over the last few years as they struggled to save a deposit due to rising rent and house prices.
“This ultimately pushes prices up as people scramble for property, and the only cure is a radical house building plan that enables people to buy good quality homes at a fair price that stand the test of time,” Noye noted.
She praised government’s actions to abolish Section 21 Notices and improve the condition of rented housing stock, but said it did not go far enough.
“Fixing the rental market is needed and understandable but is a sticking plaster that fails to address a much larger problem.
“Ultimately, we need to help more people get their first foot on the property ladder so they can build up equity and enjoy some of the wealth creation opportunities that generations before have enjoyed from housing,” Noye said.
“Crying out” for clarity on affordable housing
Jeremy Leaf, north London estate agent and former RICS residential chairman, added that the industry had wanted further clarity on affordable housing and whether its provision would improve.
“The industry is crying out for this, as well as more transactions, which are good not just for the property industry but the wider economy,” he said.
He added that the sector wanted “clearer direction” for bringing empty homes back into use.
Secretary of state for the Department for Levelling Up’s Michael Gove has previously said he would give local leaders the ability to force landlords out of empty shops to revive the high street.
Leaf continued: “The comments regarding planning are welcome but the test will be in the delivery, whether small and medium-sized builders in particular don’t feel marginalised and have a good chance of obtaining planning consent reasonably quickly.”
He added that he would have welcomed more “encouragement for energy efficiency in properties for rent and sale.”
The legislation, which is yet to be ratified, will mandate that existing rental tenancies have to get an Energy Performance Certificate (EPC) of C or higher by 2025, and new tenancies will need to reach the same bar by 2028.
However, there is still a lack of clarity as to when the legislation will come into effect, with the draft deadline set to be extended from 30 April 2025 to 31 December 2025, and a further extension to 2026 expected.
According to reports in national newspapers, the prime minister has tasked his policy unit with putting together proposals for how such a scheme could work.
Right to Buy was a flagship policy of Margaret Thatcher’s government in the 1980s, which resulted in almost three million council homes being sold at a reduced price to tenants. A version of the scheme is still in operation today, offering eligible tenants a potential discount of up to £87,200 (rising to £116,200 in London) so long as they are a secure tenant and have been a public sector tenant for at least three years.
Currently around 2.5m households rent their homes from housing associations.
According to the reports, Boris Johnson believes the revamped Right to Buy scheme would help many renters in areas like the Midlands and the North East, so called “red wall” areas which have traditionally voted Labour but instead voted Conservative in 2019.
The idea of relaunching Right to Buy comes ahead of the local elections this Thursday, in which the government is expected to do poorly.
David Cameron previously raised the idea of a housing association version of the scheme when he was Prime Minister, with pilots held in 2016 and 2018, however nothing came of them.
The suggestion of a new Right to Buy scheme has not been welcomed by housing campaigners, who caution that it will only make the shortage of affordable housing worse.
Polly Neate, chief executive of Shelter, described it as a “hare-brained idea” which was “the opposite of what the country needs”.
She added: “Right to Buy has already torn a massive hole in our social housing stock as less than five per cent of the homes sold off have ever been replaced. These half-baked plans have been tried before and they’ve failed. Over one million households are stuck on social housing waiting lists in England, and with every bill skyrocketing, the government should be building more social homes so we have more, not less.”
Last month the Right to Buy scheme was branded a “strategic failure”, with around 40 per cent of the council homes purchased ending up being owned by private landlords.
This is double that of the same period a year ago, and almost four times the level reported in Q1 2020 when only 16 per cent of landlords felt that demand was growing, according to a survey of 700 landlords by Paragon Bank.
A ‘significant increase’ was seen by 34 per cent of respondents, with a further 28 per cent reporting slight increases. Perceived decreases in tenant demand, both significant and slight, were recorded by just three per cent of landlords, the lowest on record.
Regionally, the results show a resurgence of the Central London rental market. Increasing tenant demand was reported by 84 per cent of landlords operating in the inner part of the capital, a prolific increase on the 12 per cent seen in Q1 2021. This places Central London alongside the South West and Wales as the regions seeing the highest levels of increasing tenant demand during the previous three months.
The data also confirms that the number of people seeking privately rented homes has grown consistently throughout the course of the Covid pandemic. This has continued into 2022 after growing to the highest level recorded since 2011, when research agency BVA BDRC started tracking the metric.
Moray Hulme, mortgage sales director for Paragon Bank, said: “Another record high in the proportion of landlords reporting increasing tenant demand reaffirms the need to increase the supply of homes in the private rented sector.
“There is evidence of landlords exiting the sector with many citing increasing tax and regulatory requirements making their lettings business more arduous to operate.
“While it is clearly important that landlords are taxed appropriately and the sector is regulated to ensure high standards are maintained, we must ensure that buy-to-let remains attractive enough to investors who are vital in supplying the properties needed to meet demand.”
Lenders and housing associations speaking on panel sessions at Just Mortgages’ inaugural new build and affordable housing event said brokers should prepare for an increase in shared ownership enquiries, especially as Help to Buy is due to end next year.
Furthermore, they said housing associations are expected to build more shared ownership houses and increasing numbers of lenders are predicted to enter the space.
However, panellists said there needed to be more consumer awareness and understanding of shared ownership, so brokers had a key role to play in educating borrowers.
Panellists also noted that there were multiple affordable housing options which borrowers should consider, including Deposit Unlock, private equity loan schemes, the mortgage guarantee scheme and First Homes scheme.
Lenders speaking on the three panel sessions during the day included Barclays, Halifax, Nationwide, Santander, Leeds Building Society, Skipton Building Society, Kent Reliance and Kensington Mortgages.
Housing associations and property providers on the panels included Sage Housing, SO Resi Partnerships, NU Living and Swan Housing.
John Doughty, financial services director at Just Mortgages New Build Division, said: “Lenders and brokers are getting less Help to Buy enquiries from customers as restrictions were introduced a year ago and the scheme nears the end of its shelf life. Instead, we are talking to more people wanting to know if they are eligible for shared ownership.
“I would like to take this opportunity to thank all the lenders, housing associations, property providers and developers for their participation in our event during what was a thought-provoking and successful day.”
Shared ownership currently accounts for two per cent of housing stock and the government has pledge funding for up to 90,000 new shared ownership properties over the next five years.
Research from Lloyds Banking Group of 880 adults found those living in the capital were the most dissatisfied with their local property market and 67 per cent expected prices to rise within three years, making it less affordable and attainable.
According to the latest Halifax house price index, property prices in London rose 5.4 per cent annually to over £550,000.
Concerns among Londoners include unaffordable house prices, with 68 per cent citing this, while half of the respondents said a lack of social housing was an issue.
Some 40 per cent said deposit requirements were an issue, while 44 per cent said there was not enough quality, affordable rental homes available.
Other concerns included a lack of new homes being built, as cited by 31 per cent of respondents, a quarter said economic issues caused by the pandemic and 23 per cent said the impact of Brexit on the economy and supply chains.
Additionally, 45 per cent said homes were not being built where people wanted to live and 55 per cent said homes did not meet the needs of their local area.
As for what London-based buyers want from their homes, two-thirds said good transport links, nearly half wanted to live near sufficient amenities and 43 per cent wanted to live in an attractive area.
Some 39 per cent wanted to live near family and friends while 28 per cent wanted a big garden.
Simon Kenyon, Lloyds Banking Group’s ambassador for London, said: “House prices and transaction volumes, even among first time-buyers, have remained strong during the pandemic. However, this research also shows that many people in London consider the continued strength of prices as the biggest factor preventing people from accessing quality and affordable homes.
“Understanding these local trends, will be vitally important in ensuring the homes being built keep pace with the changing needs of individuals and local communities. That’s why, as part of our commitment to help Britain prosper, we are working across the industry to collectively work out how we deliver the high-quality, sustainable and affordable homes that London needs.”
Marc Vlessing, CEO of Pocket Living, one of London and the South East’s affordable housing developers, said: “The findings of this research echoes what we hear all the time from aspiring first-time buyers; Londoners want a space they can call their own without having to compromise on the many benefits of city living.”
Pocket Living has partnered with Lloyds to help deliver discounted homes in London.
Vlessing added: “If we are to accelerate this to the next level, we need to see ambitious planning reform that encourages greater innovation in the market and that unlocks the potential of urban brownfield sites for affordable housing.”
According to Leeds Building Society, three out of five of all its shared ownership buyers over the last three years bought homes in UK regions outside London and the South East, with areas including the South West – where borrowing rose from 14 per cent in 2019 to 15 per cent in 2021 – proving popular.
It continued that the number of society borrowers using shared ownership in the South East rise from 23 per cent to 28 per cent between 2019 and 2021. In the East Midlands the number of shared ownership borrowers rose from eight per cent to 10 per cent and in the West Midlands numbers rose from seven per cent to nine per cent of borrowers to nine per cent over the same period.
The proportion of the mutual’s shared ownership borrowers buying in Greater London has staid roughly stable at 13 per cent over the three years. However, in the North West the number of borrowers fell from 12 per cent to eight per cent and by six per cent to five per cent in Yorkshire during the same period.
Shared ownership enables people to purchase part of a property initially and pay rent to a landlord, which is usually a housing association, on the remaining share. Borrowers can then choose to purchase further shares in order to increase the proportion of equity they own.
Martese Carton (pictured), director of mortgage distribution at Leeds Building Society, said shared ownership offered first-time buyers an opportunity to step onto the property ladder.
She said: “London has traditionally been associated with shared ownership due to its high property prices, but it’s interesting to see homebuyers in other regions taking advantage of the scheme and demonstrates how it has the potential to help us bring home ownership within reach of more people in areas across the UK.
“With the gap between house prices and incomes predicted to continue growing, affordable housing schemes like shared ownership, which have been supporting buyers for over 40 years, offer a way onto the property ladder in areas like the South East where prices tend to be higher. Borrowers also appear to be using the tenure to buy outside larger city centres.”
Carlton added: “We’ll be continuing to monitor these regional trends closely because we’re always looking for ways to widen access to home ownership and ensure our products and lending criteria are meeting borrowers’ needs.”
Assetz said it would be increasing investment in SME housebuilders through its specialist housebuilding finance platform, Assetz Capital. The subsidiary is aiming to fund a quarter of all SME new-builds over the long-term.
Its 2022 strategy, set out in its Investing in a Fairer Future report, will involve doubling down on the social impact of its funding, including more eco-homes and affordable housing.
It said it would also play a larger role in the provision of funding for development or investment in supported living and care accommodation.
Assetz Capital said it intended to reach a £1bn lending run-rate this year and £1.5bn run-rate in 2023, in an initiative it hoped would revive the SME housebuilding sector from current lows of just 2,500 companies, to the sector’s peak in the 1980s where the number was around 12,000.
The group said it intended to grow lending support for the development and long-term finance of all forms of care and supported living accommodation, and increase its funding of commercial mortgages for trading businesses across the UK.
It hoped its initiative would enable the UK to meet national housing targets by addressing the housing crisis. It would also satisfy the huge demand for new energy efficient homes as the nation sought to decarbonise housing stock and adapt to a world shaped by the pandemic and a huge surge in energy costs.
According to Assetz, its group of companies has helped fund approximately £2.5bn worth of new housing since 1999 – equating to around new 16,000 homes – and has helped 1,110 SMEs across the country gain access to alternative finance to fund projects and support business growth.
The company added that it would commit to ensuring at least 95 per cent of all new homes it funds are EPC B-rated or above by the end of the year.
Assetz Exchange, the group’s investment subsidiary, will develop housing for those most in need through provision of supported living accommodation, providing fairer rents than those presently offered by investors to charities.
Stuart Law (pictured), chief executive of the Assetz Group, said: “Since launching the Assetz group of companies over 20 years ago, our purpose has been consistent – to provide investors who understand investment risk with an innovative platform which offers healthy returns backed by property security, while putting their capital to work to tackle big social challenges and support undersupplied areas of the market.
“This year we will go further than ever to support SMEs, catalyse the delivery of low carbon housing and take a leadership role in boosting the provision of much needed supported living accommodation to help address the growing crisis in the care sector.”
He added: “We have always believed that financial success and making a positive social impact are closely linked, a view we share with an increasing majority of investors who understand that using their capital for the benefit of wider society, as an extra return beyond headline interest rates, is the best way to generate sustainable returns long term.
“In this context we are laser-focused on growing the Group this year to provide even more attractive opportunities for investors, support the growth of UK trading businesses and job creation, and provide increasing numbers of energy efficient homes to those that need them most.”
Meanwhile, the number of homes priced at market value under construction using Homes England grant funding rose from 2,685 to 3,974 year-on-year.
Figures released by Homes England, a public body that receives funding from the government to deliver affordable housing, show a seven per cent year-on-year decline between April and September in its affordable homes delivery.
Not since the six months to September 17/18 when construction of 6,968 affordable homes began, have rates of housing starts been so low.
According to the public body, affordable homes delivery fell because developers could no longer bid for funding through its shared ownership programme. A new affordable homes programme was launched in April.
The aim of the new scheme is to provide over £7.39bn of grant funding through Homes England from April 2021 to help pay for the construction of up to 130,000 new homes outside of London by March 2026.
Overall, homes delivered by Homes England partners reached 13,229 between April and September, up from 12,652 the year before, an increase of five per cent. However, compared to the same period in 2019, housing starts were down by 27 per cent.
Homes England programmes are funded by the government to allow housing associations, builders, community groups and local authorities to build affordable homes.
Schemes include affordable homes to buy and rent built by local authorities and housing associations, shared ownership homes and some housing sold at open market value.
The changes come into force from today and those earning less than £40,000 the maximum LTI is now 4.49x income. This limit was previously applied to those whose income was less than £30,000.
For borrowers earning over £75,000 with loans up to £1m at less than 75 per cent loan to value (LTV) they can access 5.5x income. This is an increase from 5x income.
At the same income bracket, loans between £75,000 and £1m from 75 to 85 per cent LTV the LTI has gone from 4x to 4.49x income.
Also for those earning above £75,000, and for loans between £500,000 and £750,000 with an LTV between 85 and 95 per cent, the maximum LTI is increasing from 4x to 4.49x income.
The lender has also boosted additional duty hours and nursing bank income allowed from 60 per cent to 100 per cent.
The lender added that a maximum LTI of 4.49x income applies to affordable housing schemes where there is self-employed income.
