Why can’t we build houses quickly enough?

There is more pressure than ever to find a solution to the housing crisis. Demand is constantly rising whilst the available supply of housing gets nowhere near satisfying the demand.

It is important to understand in the first place why there is a problem because this drives many of the issues as to why delivering the quantity of housing is so difficult.

The changing demographics in the UK have led to a growing number of one person households sitting outside the traditional family household. In addition, the increase in life expectancy means that there is less available housing stock as people stay longer in houses as they get older.

So who are we relying on to deliver housing for us?

In the main, we have looked towards the large housebuilders to deliver the numbers. They have in theory the capacity, expertise and resources to build large numbers of houses.

There is however more complexity in terms of demand. The question rages around home ownership and the almost unhealthy obsession with it. There is an undoubted need to deliver more affordable housing, which ultimately falls to the Government, because without public money, of which there is never enough, we can never be expected to get to a point where delivering the numbers is a solely market solution.

Aside from the large housebuilders there is the housing association sector which is in business to deliver and manage affordable housing, It has also been a sector which through changing corporate structures delivers open market housing competing with the housebuilders for very different reasons but increasingly plays its part in the market.

And then there are the SMEs, small to medium builders who can play an important role but are increasingly pushed out of the market because of a lack of buying power in the market.

What are the main issues faced by these developers in getting where we need to be?

There is no one problem and no one answer. The problems faced by developers do change according to the economic factors at the prevailing time. For example, post 2008 following the credit crunch, mortgage advances collapsed. This in turn meant that housebuilders had to slow and stop in some cases building on sites because they couldn’t sell anything.

Aside from the extremes of circumstances like the credit crunch there have been a number of common themes which have acted as barriers to housing delivery:

  • The Planning System

Is it fit for purpose?

The speed with which planning applications are dealt, including signing off planning conditions, which  is slow primarily based on the fact that resources are slim. There is also a lack of experienced planners in local authorities as most work in consultancy.

There is also a question mark over the fact that planning applications are dealt with in the same way regardless of the size of the site. The consequence is that it is costly for SMEs and potentially makes the delivery of a small site unviable in terms of hard cost and the delays caused by a creaking system.

  • Finance

The availability of finance is not what it was. Since the credit crunch, lending and credit availability for development is more scarce. The conditions imposed before funds can be drawn down have also become more voluminous and trickier to satisfy. This slows down the process of having funds available to fund a project.

The Government has however sought to alleviate the pressure with different funds via available Homes England to try and speed up delivery. For example, the £5.5bn Housing Infrastructure Fund, which seeks to unlock sites by providing upfront infrastructure funding to bring forward land which is otherwise not deliverable.

Is this enough?

It remains to be seen but Homes England has ambitious targets such as delivering at least 130,000 affordable housing starts by March 2022.

  • Skills and supply chain

There has been a growing labour shortage in the construction industry so regardless of what land and finance is available, without the skills on site houses don’t get built. It is anticipated that by 2026, there will be a 20-25% decline in the construction workforce. The impact of Brexit and its uncertainty has also has an effect with foreign labour known to be returning to countries of origin.

As a country we are only just getting our heads round modern methods of construction, factory built housing which can increase productivity. Alongside, tensions created by the planning system there is some way to go before it is more the norm in housing construction in the UK.

  • Policy consistency

There is a lack of consistency in approach to housing in particular as regards affordable housing. Much of this has been a large turnover of housing Ministers, many just getting to grips with the brief before they are moved on. This does not help the need for ensuring that policies are implemented consistently and with expertise.

A new Government which is now in place may further affect housing delivery, albeit which way we don’t know.

In short, we have a long way to go before the issues in the way of development are lifted and enable to UK to meet its housing need.

For more information on the above please contact Paul Butterworth from the Real Estate Team.

Please note that this article appeared in Property Investor News.

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