The lights are on but no one’s home

Housing is increasingly becoming the focus for economic growth and as such, today, David Cameron partnered Nick Clegg to announce yet more initiatives to stimulate house building.

While detail is somewhat thin on the ground, the Government appears to be laying the foundations for a quicker planning process. For example, current restrictions of affordable housing quotas will be scrapped where developers can prove that it is this which makes a project unviable and, hence, stalled. This will certainly be a contentious area where developers can renege on the affordable housing agreements and start building – who will judge this criteria? Moreover, will there will be targets to ensure that house building starts as soon as the affordable housing criteria is removed?

Planning teams are also expected to pick up the pace of their work or face being put in to a ‘special measures’ group allowing developers to bypass councils altogether. Notwithstanding the issue of who judges the ‘pace’, there are likely be capacity issues within many depleted planning teams.

There were also some funding announcements, such as FirstBuy, the deposit opportunity for first time buyers, which is to be extended by £280m and new capital funding of £300m for affordable housing but it has also been difficult to distinguish what has already been announced.

Fundamentally, the measures are based upon the premise that the planning system is the key issue both in the short term and long term to getting the more houses that the country needs.  While there are definite gains to be made by tweaking the system, we also need house builders to pull their weight too.

Many house-builders bought land at the peak of the market and are now stuck, understandably unwilling to incur losses. But this means there are large amounts of land which have permission granted but on which no building is taking place.  This restricted supply of both land and housing is pushing up prices.

Part of the problem is the lack of competition within this industry. It is dominated by a few large firms who are not incentivised to keep prices competitive nor incentivised to sell on land they can’t/won’t build on.  Options for encouraging more competition within the industry as well exploring ways to use the tax system to ensure that land with planning permission is built out within a reasonable time-frame need to be explored further.  Recent initiatives such as IKEA’s cheap, flat-pack houses, as well the refocus on the role of self-build offer a glimpse as to how the industry might develop in the future.

There are clearly two sides to the story in solving our housing issue – the trick is finding out whom and in which areas the problem lies with.

More information on housing can be found here.

Follow Joe Sarling on Twitter: @joesarling

This article was first published on the Centre for Cities blog.

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