Following Labour leader Sir Keir Starmer’s pledge to build the ‘next generation’ of new towns and 1.5 million new homes as part of ‘a decade of renewal under Labour’, and ahead of what will be a key political battleground in the lead up to the election, Brickflow’s ‘Solving the UK’s Housing Shortage’ white paper aims to give politicians from all parties a comprehensive framework to address the housing crisis.
It examines every element of the housebuilding process, scrutinises hundreds of pages of government policy to lay bare both the successes and failures, and garners opinion from industry leaders including Knight Frank and PwC, concluding with actionable recommendations.
The key components of the housing sector, from planning to land supply, and developer incentives to affordability, are inextricably linked and interdependent. This means there is no silver-bullet fix to address the housing crisis. Key barriers to doing so include a slow planning system, shortage of land and failure to encourage development, plus supply chain, environmental, affordability and funding issues.
Some 93% of SME developers say securing planning permission is a problem, while 76% believe local authority staffing shortages are the main cause of delays, according to the white paper. At the same time,over 90% of land in England is of non-developed use, yet just 0.2% is available for development. Councils are often under pressure to reject plans and authorities have no immediate financial benefits for granting planning permission.
This comes against a backdrop of shortages of raw materials and skilled workers causing unprecedentedly high build costs. Some 60% of imported construction materials comes from the EU and are now subject to Brexit complications.
Inflation, increased mortgage costs and restricted availability, plus inflated rent, have created affordability issues and an equity gap for potential homeowners. Developers are therefore reluctant to build houses that may not sell.
Funding has also been harder to obtain since 2008’s crash, lender criteria has tightened, but the main reason for finance being less readily available is the rising base rate. With every 1% increase, a developer needs £10,000 more in equity per £1m borrowed.
Environmental challenges are also rising. The Future Homes Standard requires homes built from 2025 to produce 75% to 80% less carbon emissions. There are calls for no new homes to connect to the gas grid from 2025. And nutrient neutrality guidelines affect over two-thirds of SME developers and restrict development across 74 local authorities in England.
With less equity available, the amount developers can borrow with the same amount of equity is 25% lower than last year, creating a liquidity crunch.
Government-backed funding initiatives often lack longevity, are too complex to navigate and overall awareness of the schemes tends to be low. Transparent market access is difficult due to the CRE finance sector being one of the last to digitise.
Moving forward
The Brickflow white paper identifies key areas for change, recommending the following framework to repair the broken system:
1. Increase planning department funding now - this is a better alternative to consulting on whether to increase planning application fees. It may cost developers more in the short-term, but they, and the whole economy, will benefit from a faster process in the long-term.
2. Provide greater household projection clarity - introduce methodology that enables local authorities to identify housing requirements and adhere to new local plan timetables.
3. Introduce a database for all public-sector land - including local authority and national government-owned. Identify suitable brownfield sites and audit green belt land, reclassifying low-quality ‘grey belt’ areas.
4. Use the Infrastructure Levy to support local communities and infrastructure – do not use it to plug other authority financial gaps; benefit the local communities where housebuilding occurs.
5. Improve government and private-sector developer funding – increase longevity, scale and access to government-backed schemes. Improve access to development finance from the private sector through investment in further digitisation.
6. Implement a robust energy and water infrastructure strategy – with more wind farms to reinforce the electricity grid. Address key contributors to nutrient-related river pollution, such as the agricultural industry and water companies, rather than developers (who contribute just 5%).
7. Increase buyer affordability by bringing back Help to Buy - or a similar scheme.
8. Build market confidence in modern methods of construction - to build council/housing association properties where a mortgage isn’t necessary, to prove its longevity and efficiency.
9. Invest in technology to facilitate more building, buying and selling - in addition to digitising planning and land supply, digitise the buying and selling of homes to remove the archaic paper-based conveyancing process.
10. Adopt a culture of collaboration and action – cross-party government ministers or representatives must meet with housing sector stakeholders to move forward with practical solutions. And end the revolving door of housing ministers.
Ian Humphreys is chief executive and founder of Brickflow
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