7 Oct 2015

Housing crisis: will Cameron’s ‘national crusade’ work?

David Cameron promises a “national crusade” to boost house building, with the aim of helping more people buy their own homes. Why has housing become a crisis?

Why are there too few houses?

There is a growing need for homes. According to the latest government figures, between 1980 and 2013-14 the number of households in England grew by 5.5m, from 17.1m to 22.6m.

Housebuilding is not keeping up. According to research by property company Savills, the number of new homes started in the year to March 2015 was 156,000.

Although this is the highest since the downturn in 2008, it is only just over half what is needed. Savills reckons that house building in Britain is falling short by some 136,000 a year.

Generation rent

This means that ever more people are being forced to rent when they would rather buy. There are now 4.4 million private renters (19 per cent of households), and in 2013-14 almost one in four private rented households were in London, where house prices are highest.

Renting from a private landlord is more expensive than buying a property, yet it is the more affluent households who are buying with a mortgage: three out of five of them have incomes of £700 or more a week.

Tenants pay an average of £176 a week in rent, 34 per cent of their income. In contrast buying a house with a mortgage costs an average of £153 a week. According to the Home Builders Federation, eight out of 10 first-time buyers need financial help from family and friends.

Government schemes

In 2013, while in coalition with the Lib Dems, the government brought in a help to buy scheme which was designed to help people without a large deposit to buy a home. The first phase of this scheme, which began in April 2013, was applicable to new-build homes worth up to £600,000. Phase two, which began in January 2014, was applicable to old and new homes worth up to £600,000.

However critics have said that these initiatives stimulate demand for new homes without addressing the problem of lack of supply.

Home ownership

In his speech to the Conservative conference, David Cameron said the government is focused on moving people out of “Generation Rent” and into “Generation Buy”.

In order to achieve this, it is planning to change the requirements on developers to provide affordable homes for rent in any new development. Instead, it will require the inclusion of low-cost homes for people to buy.

The government has already pledged to allow housing association tenants the right to buy their homes. This move will extend the opportunity for tenants to buy their home at a discount to 2.3 million people.

Planning problems

Research published by property company Savills earlier in 2015 concluded that planning issues were the main barrier to the building of new homes, especially in areas of high housing demand: “In many parts of the south east and the east of England, the number of planning consents are falling well below objectively assessed need.”

But can Mr Cameron take his party with him? An analysis of planning applications by property consultancy Daniel Watney found that local councils under Conservative control were less likely to approve developments of more than 10 homes than Labour councils.