With the Government promising to tackle long-term problems in the housing market, Maeve England, Bath-b
ased law firm Mogers’ head of construction and commercial dispute resolution, explores the issue in the latest Bath Business News Expert Panel article and asks whether enough homes are being built.
Even before the Budget, the Government had committed to invest in housing more than £11bn during the 2010 Spending Review period.
But Chancellor George Osborne’s latest reforms include £5.4bn of financial support, of which £1.3bn is in 2013-2014, intended to tackle long-term problems in the housing market. Mr Osborne wants to support those who want to get on or move up the housing ladder but there is concern that the Help-to-Buy scheme will simply help people who can already afford to buy.
Housebuilders have warned that there must be a parallel increase in the number of houses built and that these measures will not go far enough to ensure this is the case.
Many inside and outside the industry believe that the real problem the Government should be focusing on is unlocking funding.
There is a track record of initiatives which have disappointed: the Funding for Lending Scheme – launched last summer – which offered lenders funding at low interest rates provided it was passed on to households and businesses, is an example.
Net lending by banks and building societies fell £1.5bn in the six months following the launch, even though they borrowed £13.8bn through the scheme.
There is a fear that the latest measures may simply have the effect of pushing up house prices without unlocking investment, making houses even less affordable, rather than helping new owners onto the ladder.
The National Housing Federation (NHF), which considers that the scheme has the “potential” to help some onto the housing ladder, has stated “… the danger is that if we don’t tackle the fact we’re still not building enough homes, we’ll just create another housing bubble that will continue to push house prices up and out of reach of the majority”.
It is too early to judge the likely impact of the Chancellor’s measures, but they are at least a strong indication that the Government recognises the construction industry is essential to turning the economy around.
The industry has, after all, borne the brunt of the recession with 400,000 jobs lost since the start of the downturn and is key to the recovery.
Alongside measures to increase home ownership, the Government intends to reform the planning system, with a view to increasing housing supply.
It believes that planning constraints have in the past depressed the supply of new homes. Over the past 10 years, there has been an average of only 161,000 net additions to the housing stock a year while the number of households in England is projected to grow to 27.5m in 2033, an increase of 232,000 households a year.
This summer the Government is due to publish significantly simplified and reduced planning guidance and in addition, a public sector land auctions scheme is being progressed; plans will be announced in the Spring to shorten the time limits for bringing a planning judicial review, and the Government will also develop further measures to streamline the process for planning judicial reviews by summer 2013.
In Bath and North East Somerset, the council has produced a revised core strategy document which includes the number of new homes to be built by 2029 being 12,700 with the assumption that there will be 10,200 new jobs.
The big question is where should the houses go? Brownfield sites are still prioritised but a review of the Green Belt has concluded that some of the houses need to be built there. The council says it will still consider all of the land proposed for new homes in the previous draft Core Strategy but is now proposing additional locations for new homes. Will a change in the planning laws help to kick start the construction of new houses or fast track the decimation of the Green Belt? A faster planning process will reduce costs but banks still need to lend and buyers still need to be able to afford to buy!
So will the Government’s new proposals make it easier for the council in Bath and North East Somerset to build the new homes? Will the banks lend? Will buyers be able to afford to buy them? Will there be benefits for businesses? Only time will tell.
