Jeremy Leaf

Home ownership strife: Jeremy Leaf says, “Higher rents and tougher lending criteria continue to hamper home ownership. How can we close the gap between aspiration and reality?”

home ownership image The young family’s dream of owning a home may become a reality. Or it may not. The Housing Bill aims to implement the Government’s election promises of “supporting home ownership, increasing housing supply and helping more working people to own their own homes.”  They hope this will double the number of available properties, reduce social housing waiting lists, reverse the fall in home ownership and make housing more accessible.

Jeremy Leaf, RICS image
Jeremy Leaf

The most significant issue is the need to maintain a supply of good quality affordable homes to rent and for sale. However, I’m not sure that this latest attempt will do much more than scratch the surface.

Higher rents and tougher lending criteria continue to hamper home ownership by making it less accessible. If lenders won’t lend, buyers won’t buy and builders won’t build. More people are being squeezed out of the market. 10 years ago, 21 per cent of households aged 25 to 34 rented privately, 59 per cent were owner-occupiers. Now, the number of tenants has doubled to 48 per cent while owner-occupiers fell to 36 per cent. The government predicts that 240,000 households will be formed every year until at least 2032 but the number of new homes completed, despite recent increases, is only half that figure; while the population is ageing and rising faster than nearly every other country in the EU. The shortfall is worsening.

The good news

The Government confirmed schemes to increase home ownership:

  • Starter Home Initiative – to provide 200,000 homes for first time buyers under 40 at a 20 per cent discount.
  • Right to Build – obliges local authorities to identify suitable plots for self-building.
  • Right to Buy – extended to allow up to 1.3 million housing association tenants in England to purchase their homes at discounts to match those offered by local authorities. Sales receipts will raise £4.15bn each year (says the Government), enabling housing associations to fund replacement homes on a one-for-one basis in the same area. That policy is one of the reasons why local authorities have built so few houses, falling from 13,500 45 years ago to around 1,250 last year. But the National Housing Federation said that only 46 per cent of homes sold off by local authorities have been replaced.

Local authorities will be required to dispose of high value vacant council homes to finance the policy with remaining monies to be invested in a new Brownfield Regeneration Fund. A statutory brownfield register aims to put Local Development Orders on 90 per cent of previously used land suitable for development by 2020.

Is it enough?

In my view, these are small steps in the right direction not the radical action required to solve the housing crisis and continuing huge disconnect between supply and demand. Maybe now that the government enjoys a Parliamentary majority, some bold but unpopular decisions could be taken.

Politicians need to grasp the nettle and take radical action to improve supply.

Why not expand Build to Rent by introducing a separate planning use class and insist units cannot be sold for at least 10 years to ensure rental stock is maintained? More first time buyers could be helped by allowing them access to higher loan to value mortgages and shared ownership. Larger builders seem to be able to build just enough to keep prices up; suitable penalties are needed to stop land banking. Flexible but verifiable targets would help.

More options

Could the time be right to sanction limited additional use of green belt or even greenfield land for home building? The Adam Smith Institute report that over a million homes could be provided within walking distance of train stations by sacrificing just 3.7 per cent of London’s green belt. Planning and lending for SMEs is also still far too difficult. Extension of Help to Buy to ensure continue high loan-to-value lending to first time buyers, more building on greenfield as well as reducing planning and lending delays caused by excessive red tape is the only way to maintain higher levels of affordable housing and keep prices in check.

We all accept that we have a serious shortages of homes which will not be fixed any time soon. Politicians need to grasp the nettle and take radical action to vastly improve supply so that more people can make those homeowners’ dreams come true.

Jeremy Leaf is a Chartered Surveyor, estate agent and a former Residential Sales Spokesman for RICS.

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