Sky-high house prices, rising rents in the private sector and a lack of affordable housing have created a broken housing market.

The failure to build enough homes has taken Britain’s housing shortage to crisis point as demand eclipses supply, pushing up house prices and rents.

The situation in London is far worse than the rest of the UK but everywhere things are pretty tough; 46 per cent of those who don’t already own their own home never expect to, a recent Bank of England survey revealed. “For far too many people up and down the country homeownership is just a distant dream,” said James Green, at the NHF. “We need to build many more homes to ensure that we are supporting people’s aspiration for homeownership.”

Supply and demand

The NAEA Housing Market Report reveals that in December stock slumped to just 37 properties per branch, half the number each branch averaged 10 years ago. Mark Hayward, Managing Director, NAEA, said, “We’re faced with a crisis. Our recent Housing 2025 report compiled with ARLA and Centre for Economics and Business Research found that by 2025, house prices are set to rise by 50 per cent – if we don’t act now this will impact first-time buyers, second steppers and last steppers, forcing many out of homeownership.”

Chancellor George Osborne, in his last Spending Review, promised ‘the biggest housebuilding programme since the 1970s’ as he earmarked £6.9billion of taxpayers’ money to support housebuilders, as part of the aim to deliver 1million new homes by 2020 and the strengthening UK economy and Government’s pro-housebuilding stance pushed up the number of new homes across the UK to an eight-year high of 156,140 in 2015, up seven per cent year-on-year.

While the 2015 annual total is still below the 199,177 new-build homes registered in 2007, it is 75 per cent higher than the 88,993 new homes registered during 2009. “We have seen encouraging levels of building across most regions of the country,” said Mike Quinton, Chief Executive, NHBC.

However, the volume of new homes registered remains significantly below the Government target of 200,000 new homes a year, and is less than two-thirds of the estimated 250,000 new homes a year needed just to meet existing demand.

“One of the most pressing issues is the population explosion. We are living longer, and the UK is receiving many more immigrants,” said James Wyatt, Partner, Barton Wyatt. “The planning system is too complex and the current greenbelt too restrictive. The Government needs to start with a clean sheet and redraw what the UK should look like, not in 10 or 20 years, but in 50 years.”

Unlocking the land

Extra land is needed to significantly boost new housing supply, and it should include more greenbelt land, according to Charlie Hustler, Land Director, Essential Living, “Few campaigners seem to be able to differentiate between ‘greenfield’ and ‘greenbelt’. And when the housing crisis isn’t being unfairly blamed on foreign investors or immigration, we are told there is a shortage of land – there isn’t. It is not without irony that those areas most vociferously opposing development are those best placed to cater for it.”

Adam Hesse, Director, Aston Mead, believes we need declassification of some greenbelt land. He wants local councils to be forced to ‘use it or lose it’ when it comes to surplus land, construction of new towns, the fast track sell off of redundant military sites, scrapping affordable contributions on new projects, and tax incentives to get owners of brownfield land with development potential to sell up.

However, the Government will still struggle to meet its target of building 200,000 homes a year in England by 2020, says Davis Ritchie, CEO, Bovis Homes; “We’re doing what we can, but the industry may not be able to grow as quickly as we are.”

So why can’t we build more homes?

Planning delays

Many developers struggle to access capital for investment, but one of the biggest constraints o is the planning process; many developers find their applications for consent shrouded in red tape and delays.

“How quickly we get more sites to the point where we can actually start to lay bricks will be a major influence on future housebuilding levels,” said Stewart Baseley, Executive Chairman, HBF.

How quickly we can get more sites to the point where we can actually start laying bricks will be a major influence on future housebuilding levels. Stewart Baseley, Executive Chairman, HBF.

Skills shortages Another obstacle facing the housebuilding sector is a shortage of labour, which is pushing up the price of hiring tradesmen. The financial crash of 2007-08 bears some of the blame as it led to thousands of people leaving the construction industry. Now that demand has returned, there is a skills shortage, with bricklayers, carpenters and joiners in short supply.

We’re already seeing housing developments stalling because of the cost of hiring skilled tradespeople. Brian Berry, Chief Executive FMB.

Brian Berry, Chief Executive, FMB, said, “We’re already seeing housing developments starting to stall because the cost of hiring skilled tradespeople is threatening to make some sites simply unviable. Unless we see a massive uplift in apprenticeship training in our industry, there won’t be enough pairs of hands to deliver more housing on this scale.”

If developing a sufficient number of new homes is to remain a problem, what other options could be considered to help resolve the housing crisis?

Empty homes

Empty properties are a vast overlooked housing resource going to waste, with over 600,000 houses classed as long-term empty in England alone. Kent County Council’s ‘No Use Empty’ (NUE) is among a host of empty homes schemes bringing long-term empty housing stock into use.

The initiative, which was used as a template for the National Empty Homes scheme, is underpinned by a loan to rejuvenate old housing stock. To date NUE has bought 4,100 homes back into use.

Custom build

A survey by Ipsos Mori found that 7 million Britons would consider building their own home, and yet the Custom Build Register, the UK’s largest and longest running record of demand for self and custom build, shows that under 23,000 people have registered to design and create their own property since it was established in 2013.

Michael Holmes at The National Homebuilding & Renovating Show, is now urging more people to consider a custom build, or a self-build project, enabling them to choose the design and specification of their property off-plan and potentially save money on stamp duty; payable on the land purchase rather than the completed house. “There are significant tax incentives and depending on the level of involvement from the homeowner, it is possible to save 20-30 per cent by self-building compared to buying something similar,” said Michael.

Build to Rent

The Build to Rent sector is of growing interest to investors. With £15billion invested so far, Knight Frank’s statistics suggest that institutional investors will commit up to £50billion by 2020.

However, the one thing that is missing is a “mini Build to Rent scheme for landlords”, according to Kate Faulkner, Managing Director, Designs on Property.

Kate wants more help offered to private landlords to build small (up to 10 homes) developments for rent.

“This would mean PRS landlords are building and creating more stock which is in great condition, and with low yields and increases in taxation, this is a win-win for everyone: government, landlord and tenant.”

Affordable homes

When it comes to affordable rental accommodation, Harry Downes, Director of Fizzy Living, believes he has come up with a groundbreaking idea. He proposes extending Permitted Development Rights so that it is granted on all town centre sites allowing developers, supported by institutional funds, to deliver PRS developments of at least 75 units, with 20 per cent of the flats to be let at 80 per cent of market rent to qualifying tenants. “These simple conditions will enable the Build to Rent sector to build viable long-term bespoke buildings, in town centre locations close to shops and transport, at affordable rents and without needing to rely on Government subsidies,” he said.

Council homes

Since the decline of local authority housebuilding in the 1980s, the UK has not been building enough social housing, while the Right to Buy initiative has reduced the availability of existing stock.

There are more than 1.8 million households waiting for a social home, up 81 per cent since 1997, and yet the number of people living in social housing in this country is in decline. Unless councils are given greater powers to build new homes, the Local Government Association (LGA) estimates that 80,000 social rented homes could be lost by 2020, as councils sell off homes under the Right to Buy scheme.

“Councils want to help the Government shift spending from benefits to bricks and support measures to help people into homeownership but the Right to Buy extension must absolutely not be funded by forcing councils to sell off their homes,” said Councillor Peter Box, LGA’s Housing Spokesman.

New strategy

Only by increasing housing supply, whether newbuilds, bringing old housing stock back into use, converting or extending existing properties, will we even come close to catering for growing demand from buyers and tenants, not to mention deliver more much needed housing stock for sales and letting agents up and down the country.

But for that to happen, further government support and a dramatic change in housing policy is needed.