Head of Research, Nicola Almond, discusses yesterday’s White Paper
Yesterday’s housing White Paper signalled an acceptance of the reality that home ownership is not for everyone, and that the rental sector needs to play an increasingly important role. Building homes faster and providing more homes for rent appear to be the government’s main fixes for what it acknowledges is the ‘broken housing market’.
The government recognises that measures to boost supply are essential if the target of 250,000 additional homes per year is to be achieved, and the White Paper is looking mainly to planning reform to achieve this with a combination of higher local targets for numbers of homes and speedier construction. Although the government recognises a shortage of available land there are no plans to relax green belt rules, with the focus for land provision remaining on brownfield sites. The government repeated its commitment to releasing surplus public land with a capacity for 160,000 homes during this Parliament.
According to the government, 40% of local planning authorities do not have an up to date plan that meets projected needs, so councils will be forced to plan for more homes by producing ‘realistic’ and regularly updated Local Plans, with higher density developments (including mansion blocks, mews houses and terraced streets) where appropriate. Councils will also be helped to build more homes, although details of this are yet to be disclosed; many are hoping that the Housing Revenue Account (HRA) borrowing cap will be lifted.
Planning rules will be amended to allow more homes for rent, in both the private (BtR) and affordable sectors. The government is aiming to improve the quality of rental properties and lengthen tenancy terms by professionalising the private rented sector, encouraging institutional investment in Build to Rent (BtR) properties and in effect leaving the Buy-to-Let market to wither on the vine as increased taxes continue to take effect.
Once construction is underway developers will be forced to build faster, with completion notices imposing a deadline of two years rather than three between planning consent and completion.
The government is hoping to encourage more construction companies into the market, and the white Paper reiterated its commitment to use the £3bn Home Building Fund previously announced to encourage SMEs into the sector. Many of these exited the market during the last recession, and 60% of new homes are built by only 10 companies.
Measures to help home buyers at the bottom of the property ladder were announced, including Lifetime ISAs (helping first-time buyers save for a deposit) and further restrictions on the purchase of starter homes. These homes, currently sold at least 20% below market value to first time buyers aged 23-40, will be available only to households with combined incomes of less than £80,000 (or £90,000 in London) who are buying with a mortgage. The planned number of starter homes is likely to fall however, as the requirement for 20% of larger developments to be starter homes is to be dropped in favour of at least 10% of these schemes being ‘affordable home ownership units’.
Affordable housing initiatives announced previously were reiterated in the White Paper, such as the £1.4bn of extra funding for the Affordable Homes Programme, and the extension of Right to Buy to include housing association tenants.
The White Paper has generally had a lukewarm reception, with many seeing it as papering over the cracks of the ‘broken housing market’ rather than engendering the radical reform needed. Whilst the emergent Build to Rent sector undoubtedly has an important role to play, it is unlikely to prove a panacea, and there are increasing expectations that councils will have to start building again to rectify the ongoing imbalance between supply and demand.