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10 July 2009
Why we’re in denial over housing supply
I’ve been reading with great interest the National Housing and Planning Advice Unit’s (NHPAU) report and research into the public's attitudes to housing, and the affordability problem in England. They highlight the imperative of having sufficient homes to meet demand.
The NHPAU states quite rightly that attitudes to new housing development need to change as a matter of urgency. In their research 51 per cent of homeowners would oppose more homes being built in their area, compared with 31 per cent of non-homeowners! So we’re in denial at a time when 6 million young people will not be able to get on the housing ladder until prices fall to more affordable levels and they have realistic access to a mortgage.
As I‘ve said in recent blog posts recessions do not impact on the number of people wanting a home, but they do cause a sharp drop in the number being built. All this serves to exacerbate a growing problem of the mismatch between supply and demand.
The NHPAU’s report states that, “the evidence is clear: we need to take some major steps to close the gap between supply and demand or the consequences for individuals and families will become increasingly severe, with wider economic and social impacts. We need to move the debate on from whether there is a problem… to how we can plan for the homes we clearly need in a way that will benefit existing communities and protect the environment."
What are the consequences of not enough housing being built? More people will be homeless or live in overcrowded conditions, more young people will be forced to continue living with their parents, and the aspirations of millions to live in the type of homes they want, where they want, will be frustrated. This lack of people mobility will impact upon the wider economy.
In some respects the whole issue of housing is being buried underneath the recession, but the housing problem will be here long after the recession has passed. Therefore, current and future Governments need to create robust policies that will improve Britain’s housing supply. This is of course not as simple as it sounds.
What we don’t need however is knee jerk responses that will create mono-tenure estates of affordable and council housing that have no regard for creating sustainable communities and which would, if built, create a legacy of social problems.
As I said in my last blog we have got to address the issue of development finance if we are going to be able to increase housing supply. Bank loans may not be as readily available in the future as they have been in the past. So how the development industry is going to be financed in the future has got to be addressed.
I also can’t help but to think of the planning situation. It is very slow to respond and the process takes an incredible length of time compared with the past. Government has tried to improve it without much success, but the Conservative’s proposals are going to make the situation worse by delaying the system further.
I welcome the Government’s additional funding for housing that was announced recently and particularly the additional £500m of Kickstart support that will enable more developments to move forward. However, the funding is still relatively modest when considered against the size of the problem.
Shared equity schemes, such as the HCA’s HomeBuy Direct and the First Time Buyer’s Initiative, are helpful in enabling more people to be able to buy a home they want. Hundreds of people are now enjoying a new Countryside Properties’ home as a result, but more needs to be done on a grander scale and we need to make these schemes easier to access and understand.
We have recently launched a new video which highlights our unique approach to development. I hope you enjoy it.
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9 January 2009
The outlook for the housing market in 2009
This recession has highlighted the importance of the housing market to the wider economy. It all started with a banking crisis in the USA that quickly spread to the UK. That adversely impacted immediately on the US and UK housing markets. As so often happens when this attracts media interest the downturn has accelerated with the result that the number of housing transactions has reduced significantly and as prices have fallen.
The present situation will only be resolved when the supply of funds for mortgages increases. We have not, as yet, seen any improvement in the supply of funding for home loans in response to the Government’s sizeable support to the banking sector. Hopefully the supply of funds will soon start to improve and only then will the markets become more active and house prices stabilise.
The best I expect to see in 2009 is for house prices to stabilise during the year and only then the market will gradually improve.
This is a particularly difficult time for first time buyers. 100 per cent mortgages have gone probably forever and they will have to save more of the finance they need. Mortgages of four times income are typically the maximum available today. For most people who already own a house and want to move they will generally not be able to do so without finding a buyer and at the bottom of every chain is a first time buyer. Therefore it’s very important that funding to first time buyers starts to flow again.
The consequence of this crisis is that more pressure is put on the affordable housing sector. This is due to those people who can’t now afford to buy turning either to the private rented sector which can be expensive or to affordable housing for shared ownership or rental. The bottom line is that it maybe cheaper for the Government to find ways to help first time buyers than trying to fund the increased provision of affordable housing.
My belief is that when housing markets start to improve the benefits will be seen in the wider economy but not until then.
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15 December 2008
The housing market and the Homes & Communities Agency
It is good news that the Homes & Communities Agency (HCA) has been launched even if it is at such a difficult time for the housing market. English Partnerships and the Housing Corporation have served housing and regeneration well and I would like to thank all those people who have been involved in them.
It is encouraging that the HCA in these very early stages is seeking to engage and know more about the problems being encountered by new homes developers and particularly how to respond to the economic recession. The HCA is aware that without the private sector there will be little actual housing delivery. However, as helpful as the HCA and other bodies such as the RDAs might be, the fundamental problem for the housing market is the shortage of finance for home loans. The banks and building societies have to rebuild their balance sheets and they have a shortage of funds to lend. However, now that interest rates have been reduced it’s a disincentive for investors who the banks and building societies are reliant on for their money supply.
Everyone really needs to understand the need to stabilise the housing markets otherwise prices will continue to fall, confidence will be lacking and as a result homebuyers will put off their decision to purchase.
How can we therefore stabilise the housing market? The priority is to find ways and means of assisting first time buyers as without them the rest of the market cannot move.
What sort of assistance can we bring to first time buyers at this time? To answer this we need to look at what the pressures on them are. They need a larger deposit than in recent years at around 10% of the purchase price. They will not be allowed to borrow more than their financial status allows – around 4 times annual income.
How far can we help first time buyers with their deposits? Some in the new homes industry have introduced equity share arrangements from 15% to 30% for a period of up to 10 years. In addition, English Partnership’s First Time Buyer Initiative has been very helpful to many and successful for us too. We hope to be able to shortly offer the new HomeBuy Direct scheme at a number of our developments. However, we’re not expecting to assist first time buyers into the long-term and maybe through the HCA, RDAs and Pathfinders (where they operate) we need to consider and come up with new initiatives to help first time buyers.
First time buyers purchase second hand properties as well as new of course and by assisting them it will undoubtedly help to get the wider market moving again. Existing homeowners are finding it difficult to sell. Many won’t sell at today’s prices whereas there may be good reasons why they need to move such as a change in job.
We really have got to do everything possible to get housing markets more active again which will in turn be good for the wider economy.
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Information correct as at 22/06/2010