The housing minister Robert Jenrick recently published an article in Prospect magazine highlighting the government’s priority to put affordable, environmentally friendly housebuilding back at the heart of our communities. It was during the last election campaign way back in 2019 that the Conservative’s electoral manifesto promised at least one million new homes by 2025. But are they on track to meet that target?
Homeownership is a high priority for the current government, which has aimed to construct at least 300,000 new-build homes every year over their current term. Understandably, there have been difficulties meeting this target due to the challenges caused by COVID-19, with the net figure in the first nine months of 2020 putting the number of new residential properties built at 94,000, significantly shy of the 300,000 a year promised.
Nevertheless, given the restrictions in place it is impossible to view these numbers outside of the COVID perspective. Indeed, according to government figures, 243,770 net additional dwellings were constructed between April 2019 and March 2020, suggesting that the numbers of newly constructed residential homes could resume closer on track once construction picks up.
Indeed, there are positive indicators that the housebuilding industry has fared reasonably well COVID despite the logistical challenges presented by the pandemic.
The National House Building Council (NHBC) recently released fresh data as part of their 2020 new home review statistics, highlighting that a total of 123,151 new homes were registered in 2020, compared with 160,319 registered in 2019, representing a 23% decline over the previous year. This is in part due to housebuilding not initially being classed as an ‘essential work’. However, looking at the data from a quarterly perspective, 39,749 new homes were registered in the Q4 of 2020, up 34% from the 29,636 registered in Q3, a growth made possible after housebuilding rebounded in the summer following the establishment of COVID-secure working practices.
But there are potential problems in the pipeline as available land for construction has become more scarce as several cities are struggling to find space on brownfield sites to build on. And housebuilders, like many businesses, also experienced financial disruption in 2020 as a result of the COVID, with reduced activity and rising build costs impacting on some developers – it remains to be seen whether this will impact on the number of new homes developed in 2021.
To support further residential development, in last November’s Spending Review the government unveiled a £10 billion investment package, which included a £7.1-billion National Home Building Fund and an additional £12 billion earmarked for the Affordable Homes Programme over the coming years.
In addition to this, the government committed to provide £400 million to build more homes on brownfield land, though the benefit of this might be impacted if developers struggle to find space on available brownfield. Where this could be mitigated in future however is if the government follows through on their goal to overhaul the country’s planning system, which may include reforms to the greenbelt that could reduce uncertainty and the rationing of development by local authorities, to reconnect the supply of new homes to local demand for housing.
The government loves a slogan, and Boris Johnson’s Build, Build, Build designation for the radical proposed shake up of the incumbent planning system will hopefully make it easier to expedite construction in the coming years.
Whether it will be sufficient to generate enough volume to meet demand is another question, however. The housing market has seen strong activity over the several months as the Stamp Duty holiday led to a surge in house moves from buyers looking to take advantage of the saving, but as the deadline draws near and activity declines, would this also reflect reduced demand in new properties?
According to Rightmove, house prices in January were up 3.3% year on year, despite the -0.9% dip over preceding month, and if activity slows, housebuilders might increase the costs of new-builds to make up for reduced demand. In the UK, the average new-build today is 30% more expensive than an existing home, according to research from the new-build inspection company, HouseScan. If financially conscious buyers look to pursue more affordable options, then new builds are likely to be less in demand compared to existing properties. For the government to meet its target of one million homes, new residential properties will need to be more affordable to be attractive.
This may come in the form of more subsidies to the construction industry to keep prices lower, or perhaps more consumer-driven vehicles such as an expansion of the Help-to-Buy scheme to encourage development, which would no doubt be beneficial to first-time buyers. No doubt many eyes will be watching next month’s Budget to determine if more fiscal support will be forthcoming that might stimulate the market.