Supply and affordability: the overriding priorities

The most pressing challenge facing the housing sector is to achieve a sustained increase in housebuilding. There has been a long-term failure to meet newly arising demand and to tackle the backlog of unmet housing need. One visible manifestation of the backlog is the 169% increase in rough sleeping recorded in England between 2010 and 2017.

Net supply of new houses fell sharply after 2008 but began rising again from 2011.

Housing supply has increased. More than 241,000 net additional homes were delivered in 2018/19, representing the highest level of delivery in at least a decade. This is at the lower level of the 240,000 to 340,000 units per year that experts, such as Professor Glen Bramley at Heriot-Watt University, believe would start to address the supply gap in England. There’s some debate over the supply gap. Economist Ian Mulheirn argues that “the housing shortage story is unconvincing”, and that there needs to be a “fundamental rethink” of the focus on supply. There is certainly agreement in the sector that increasing supply alone will not solve the affordability crisis.

Focus has turned to tenure, and particularly the contribution that more social rented housing could make to easing affordability pressures and reducing expenditure on housing benefit. Rents in social housing are typically 50% of market rates. Glen Bramley’s work for the National Housing Federation (NHF) identified a need for 90,000 new social rented homes per year up to 2031. The NHF has said that this could be achieved with additional grant funding or, in part, by capturing a greater proportion of the land value released, such as when planning permission is granted or where new infrastructure is provided.

A new era of council housing?

100 years after the ‘Addison Act‘ paved the way for large-scale council housing development, there are calls for a substantial public sector housebuilding programme to fill the supply gap. Local authority borrowing caps were removed in October 2018; this was roundly welcomed but will not, on its own, prompt development at the levels required.

Public housing investment in England has grown and currently stands at around £53 billion, but it is focused on private market interventions such as Help to Buy. A potential policy response, which has support from the Chartered Institute of Housing and National Housing Federation amongst others, is a rebalancing of investment towards affordable housing.

Quality matters

As new-build rates started to improve after the financial crash, the sector saw an initial drop in buyers’ satisfaction with their homes. The Grenfell Tower fire in 2016 further focused attention on building standards, including on the quality of materials and workmanship and the enforcement of building controls.

The May Government promised a new homes ombudsman. In the 2019 Queen’s Speech, the Johnson Government committed to the introduction of legislation on new building safety standards, which would also create a new regulator. Ensuring improved housing quality and safety standards is likely to be a priority for the incoming Government.

Areas where over half of property sales are leasehold are mainly in London and the North West around Manchester.

Leasehold reform

Increased rates of housebuilding also saw large developers selling more houses on a leasehold – rather than a freehold – basis, with some instances of very high ground rents. Following the Grenfell Tower fire, the removal of combustible cladding and the question of where costs would fall has further highlighted dissatisfaction with management standards amongst long leaseholders in blocks of flats.

Several consultation exercises have been carried out, and the Law Commission is undertaking a substantial piece of work on issues associated with residential leasehold. There is cross-party support for leasehold reform and for the reinvigoration of commonhold, which failed to take off as an alternative to leasehold ownership following its introduction in 2002.

The private rented sector

With access to both homeownership and social housing constrained, the beneficiary has been the private rented sector (PRS). In 2011, the proportion of renters in the PRS overtook the proportion in social housing to make it the second largest tenure in England. The sector had been characterised as housing younger, mobile members of the population, but now houses more low-income families with children and a growing number of elderly people.

There were around double the number of private renters in 2017/18 than ten years prior.

The PRS has the worst conditions and some of the most acute affordability issues of any tenure, particularly in areas of high housing demand. While both the Scottish and Welsh Governments used their devolved powers to increase regulation of the PRS, the Coalition Government that took office in 2010 rejected additional regulation because it would have increased the burden on reputable landlords and risked costs being passed on to tenants.

There has been a notable shift in approach in England since 2017. New regulatory measures have been introduced and the major parties have committed to abolish ‘no-fault’ evictions, thereby strengthening tenants’ security of tenure, and to further regulate letting and managing agents. Landlord bodies argue that these measures will reduce supply and further limit access to housing for those not able to buy a property or qualify for social housing.

Further reading

Insights for the new Parliament

This article is part of our series of Insights for the new Parliament. This series covers a range of topics that will take centre stage in UK and international politics in the new Parliament.