How Can The Next Government Help Fix The UK’s Housing Crisis?

The UK is facing a worsening housing crisis - in fact, it has gotten so bad that some are now calling it a housing emergency.?

In this newsletter, I will explain the depth of the crisis, what the main causes are, and how the UK’s two main political parties have reacted. I’ll also explain what I think needs to change to improve the situation.

Today, the average UK property price is nearly 10 times the average earnings. As a result, just 20% of 18 – 34 year olds own their home. This is down from a high of 70% in the post-war period.?

With fewer people able to afford homes, demand for rental accommodation has increased. This has pushed the average monthly private rent up from ￡1,016 in 2019 to ￡1,262 in May 2024 - an increase of ￡242 or nearly 25%.??

According to research from the National Residential Landlords Association (NRLA), 63% of landlords experienced increased demand for housing in Q4 2023. But at the same time, 30% said they planned to reduce the number of properties they rent, compared to 11% who said they would increase it.?

This could lead to more Section 21 “no-fault” evictions. In fact, this has already started happening. In Q1 2024, 7,863 households in England were given Section 21 evictions, an increase of 15% year-on-year.

Spiraling housing costs and a cost of living crisis have seen demand for social housing balloon in the UK. There are 47,312 households on waiting lists, an increase of nearly 20% since 2014. However, the number of social homes available has decreased by 1.4 million since 1979.

Needless to say, this has had an impact on homelessness. Between July and September 2023, 109,000 households were living in temporary accommodation, an increase of 10%. This figure includes around 139,000 children.?

The number of people sleeping rough in the UK has increased by 27% in the last year and 61% over the last decade.

What has caused this?

Put simply, the UK does not build enough houses. The government estimates that 300,000 are required each year, but only 212,570 were built in 2022/23. This shortfall means it needs to build even more homes in future years.?

Part of the reason for this is the UK’s planning system. Getting new housing developments approved is a slow, expensive process. Developers often have to overcome opposition from local people and go through a myriad of red tape.

For example, one housing development in Watford was rejected because it could cause moderate harm to bats - even though none had been found on the site.?

There are also other issues, including developers holding on to land until its value increases (known as land banking), not having enough skilled workers, and the rising cost of raw materials.?

But building homes is only one half of the story.

The other half is that national policies governing housing are outdated. They reflect a time when the majority of people owned their homes. During this time, rented accommodation was seen as a temporary measure for young people while they saved to get on the housing ladder.?

Policies like Section 21 “no-fault” evictions were always unfair to renters. But they didn’t impact as many people as they do today.?

Now we see people in their 30s and 40s, with decent jobs and families, being evicted from their homes through no fault of their own.?

The quality of socially and privately rented homes is also often poor. The Grenfell Tower fire showed us that some of the homes people live in aren’t just below standard - they are downright dangerous.??

How Did The Last Government Perform On Housing?

In recent years, various conservative governments have recognised the need for change in the housing sector.?

For example, Boris Johnson’s government planned to introduce development zones. Under this policy, developments in areas designated as growth zones could get planning permission automatically as long as they conformed to pre-agreed local plans.?

However, this policy was dropped due to a rebellion from Conservative backbenchers.?

It also tried to introduce binding local authority targets for house building. However, these targets were also dropped due to backlash from MPs.?

Let’s look at the status of the other 2019 Conservative Manifesto housing pledges:

?? Long-term fixed-rate mortgages with low deposits for first-time buyers: The government introduced the temporary Mortgage Guarantee Scheme in 2021 and extended it in 2023. The scheme sees the government act as a guarantor on some mortgages to encourage lenders to provide low-deposit deals.?

?? Renew the Affordable Housing Programme: This was renewed but looks set to fall far short of the 180,000 homes it aimed to deliver.?

?? Right to Buy Scheme: This was also continued. However, this reduces social housing stock, which I believe compounds the housing crisis.?

?? End homelessness: The manifesto aimed to end homelessness by the end of the next parliament. Instead, homelessness has increased 27%.

?? Scrap Section 21 no-fault evictions: This was part of the Renter Reform Bill. The government had been working on this but ran out of time when the general election was called. It was not selected to be pushed through prior to the close of parliament, meaning the bill is dead for now.

?? Introduction of lifetime deposits for renters: This is thought to have been dropped following pushback from landlords.???

?? Leasehold reform: A watered-down version of this policy was pushed through shortly before the election. It banned the building of new leasehold homes but didn’t include a much-anticipated cap on ground rent payments.?

?? House building: As mentioned, the government hasn’t met its target to build 300,000 homes per year. However, it is less than 100,000 homes short of its pledge to build 1 million houses before the next parliament.

It’s also worth noting that the Conservative government introduced several social housing reforms, including the Social Housing (Reform) Act. These have introduced sweeping changes to the social housing sector and aim to provide residents with better-quality accommodation and better communication with their landlords.?

What can we expect in the Future?

A UK general election is set to take place on 4 July 2024. The Labour Party is around 20 points ahead in the polls and looks likely to form the next government.?

The Party’s manifesto contains a lot of policies relating to housing. Some continue existing Conservative policies - for example, the Mortgage Guarantee Scheme will be extended.?

Here’s a breakdown of Labour’s housing policies:

Planning and development

?? Update the National Policy Planning Framework, including restoring mandatory housing targets.?

?? Ensure authorities have up-to-date Local Plans for housing.

?? Favour planning permission for sustainable developments.?

?? Fund additional planning officers by increasing the stamp duty surcharge paid by non-UK residents.?

?? Making greater use of government intervention powers to ensure housing targets are met.

?? Take a brownfield-first approach to housebuilding.?

?? Open parts of the green belt for housing development and set ‘golden rules’ to ensure these developments benefit communities and nature.

?? Build new towns.

?? Introduce new mechanisms for cross-boundary strategic planning.

?? Require all Combined and Mayoral Authorities to strategically plan for housing growth in their areas.?

?? Give Combined Authorities the power to make better use of grant funding.

?? Speed up and reform compulsory purchase compensation rules.

?? Award landowners “fair compensation” rather than inflated prices based on the prospect of planning permission.

?? Ensure more high-quality, well-designed, and sustainable homes are built.

Social housing and affordable homes

?? Increase social and affordable house building.?

?? Strengthen planning obligations to ensure new developments provide more affordable homes.

?? Prioritise building new social rented homes and protect existing stocks by reviewing the increased right-to-buy discounts introduced in 2012 and increasing protections on newly-built social housing.

?? Make changes to the Affordable Homes Programme to ensure that it delivers more homes from existing funding.

?? Support councils and housing associations to build at capacity and contribute more to the affordable housing supply.

?? Give first-time buyers the first chance to buy homes and avoid developments being sold off to international investors.

?? Make the mortgage guarantee scheme permanent.

Leasehold reform

?? Review how to better protect leaseholders from building safety costs.?

?? Improving leaseholder enfranchisement and introducing right to manage and commonhold policies.

?? Extend the ban on new leasehold houses to cover leasehold flats and ensure commonhold is the default tenure.

?? Regulate ground rent and maintenance charges to make them affordable for leaseholders.?

Private Rented Sector

?? Immediately abolish Section 21 ‘no fault’ evictions.

?? Empower private renters to challenge unreasonable rent increases.

?? Increase standards in rented houses, including extending ‘Awaab’s Law’ to the private sector.

Homelessness

?? Develop a new cross-government strategy, working with Mayors and Councils across the country, to end homelessness.

What The UK Housing Sector Needs

The Labour Party has ambitious manifesto promises when it comes to housing. Whether these will be successfully implemented remains to be seen.

In my opinion, the next government needs to take the following steps to try to address the UK’s housing crisis:

? Create sensible development rules

Building houses needs to be easier. It makes sense to have guidelines to ensure good practice, but there should be less red tape to build homes in suitable places.?

? Give developers greater incentives?

Developers have little incentive to build houses. The fewer homes they build, the more the land they own, and houses they have already built increase in value. There should be tax penalties for holding on to land that can be developed and bonuses for building properties.?

? The government should fund affordable homes

Developers must make at least 10% of housing affordable, but many fall short of this. I believe the government should fund the building of more affordable homes themselves. This may also encourage developers to build more homes as they would enjoy greater profit margins.?

? End the Right-to-Buy scheme

The Right to Buy scheme takes much-needed social housing out of the system and hands it to the private sector. Ending this policy will help reduce the loss of social housing.?

? Push through private rented sector reform

The Renters Reform Bill should be reintroduced. It should seek a fairer deal for residents, most importantly by scrapping Section 21 evictions.?

? Leasehold reform should continue

The next government should revisit capping ground rents for leaseholders - this is causing real financial hardship for many property owners.?

The UK’s property crisis is complex, but it’s not unsolvable. Until recently, however, the political will hasn’t been there.

However, housing is now becoming an issue for many people. This is reflected in the large amount of new housing legislation.?

I hope whoever is in power after the general election will take reform seriously and make life better for homeowners, residents, and landlords alike.?

I’d love to know your thoughts on this. What do you think are the causes of the UK’s housing crisis? What can the next government do to improve the situation?