Paul Broadhead, head of mortgage policy at the Building Societies Association, discusses options for house building and what lenders and government can do to help
Everybody needs a home. And yet in 2016 I am still pondering why a developed nation such as the UK is failing to provide them. Homeownership is becoming a pipedream for many, and competition in the rental market is fiercer than ever. Underpinning all of these issues is the fact that there are simply not enough homes to go around.
The country’s demographic is unrecognisable compared to a hundred years ago. It is more densely populated with more single-occupant homes, the population is older, plus the younger generation is both getting onto the property ladder and starting families later in life.
It all adds up to a hefty surge in demand for homes which, for decades, has been under-delivered. Over 250,000 houses must be built each year to meet demand – a target continually missed, and last hit in the early 1980s.
Progress is hindered on a number of fronts. Larger private house builders are often accused of holding back completions in a bid to maximise profit, smaller and medium-sized builders struggle to win land when competing against larger organisations.
Elsewhere local authorities are stifled by legislation, unable to secure funding to build new homes. So what can be done?
Builders
Let’s look at how the UK builds homes. Bricks and mortar have been staple materials in house building for centuries, and what many consider ‘normal’.
However, modern methods of construction (MMC) enables homes to be built largely offsite, reducing the building phase, and avoiding delays caused by typically British weather. Forget flimsy, flat-packed homes or old-fashioned prefabs, today’s offerings are visually stunning, architecturally interesting and structurally solid. They can be built faster than traditionally constructed houses.
Homes built using MMC could become more affordable if they become mainstream. Compared with traditional builds, MMC provides eco-friendlier properties that are easier and cheaper to run and repair. The enormous housing demand cannot be fulfilled with traditional construction methods alone; we need to diversify the supply of homes. The UK has been slow to embrace MMC; the USA, Australia and mainland Europe view it as the norm.
Lenders
The lending community is beginning to react and consumers seem open to the idea of living in homes of this type. If capacity in the offsite construction industry could expand to make a meaningful contribution to supply, and if more lenders felt confident enough to adapt their criteria to provide mortgages on homes built using MMC, it would contribute to a positive cascade effect.
More people would be able to buy such homes, demand for this type of home would rise, more house builders would adopt MMC, such properties would become increasingly affordable as they become mainstream. Ultimately the housing deficit would reduce as homes could be built faster and more affordably. To be clear, this is about additional supply, not replacing traditional methods.
Government
The government is very much aware of the housing challenges, and equally conscious and accepting of proposed solutions.
The All Party Parliamentary Group (APPG) for Housing was formed last year with a view to tackling the housing crisis with “proactive and coordinated thinking that cuts across political and professional divisions, [developing] workable solutions.”
Solutions will likely centre around assessing affordability and helping to provide more homes of all tenures by evolving, introducing and scrapping legislation to alleviate pressures and sanctions which currently hinder ‘home suppliers’ i.e. house builders, landlords and housing associations.
The BSA’s autumn statement submission calls for the government to build more homes. If we are to meet demand, it is crucial the government steps in and starts building on a substantial scale.
Housing market now
Media outlets persistently bombard consumers with conflicting stories regarding the UK housing market. Reassuringly, the BSA’s latest Property Tracker survey indicates confidence is returning to the housing market after a brief dip in the run-up to the EU referendum.
The referendum appears to have had less of an impact on buyer confidence than some initially anticipated. Almost half (44%) of consumers who are likely to buy a property say a change in personal circumstances has put them in a better position to do so, compared to a year ago.
Of those less likely to buy a property than this time last year, 20% cite the referendum result as their reason for holding off. Other, equally prominent reasons for not buying, include changes in personal circumstances (20%), and having already bought a house this year (19%).
It’s early days but the market has largely remained resilient amidst a turbulent and unfamiliar landscape; lenders are still lending, sellers are still selling, buyers are still buying. There is life in the housing market post-referendum.
For a future of housing that is affordable, adequate in supply and adaptable to the needs of modern households we need a cohesive approach from builders, lenders and the government. I look forward to seeing how housing develops over the coming months and years.
Original link - http://www.mortgagefinancegazette.com/market-commentary/increase-housing-supply-10-10-2016/
