Affordable homes to make up 50% of new builds?

Reported in the national press last week, analysis in a report by Savills and the National Housing Federation (https://www.savills.co.uk/research_articles/229130/366981-0) suggests significant changes for the housing market as we know it, with only around half of the 1.5 million homes the government have pledged to build during this parliament ever actually likely to be sold.

Of the 300,000 per year new builds committed to by Angela Raynor over the next four and a half  years, it is estimated that only 50% will be sold on the open market, with the rest earmarked for social tenants and renters.

As a result, England’s rate of home ownership, which has already dropped from 71% in 2004 to 65% on most recent reckonings, will continue to decline.

Assuming the government’s target of 1.5m homes in the next four and a half years is met, this will add 750,000 new homeowners, as well as the same number rented properties using a combination of council housing, grant funded affordable homes and a proportion in the build-to-rent model.

However, this still leaves the question of demand. Affordability is key for open market sales, and with employer NI increases expected to trickle down into smaller wages growth (if any) and potentially higher unemployment, developers will need to manage this carefully. The Savills report estimates a gap in demand of between 40,000 and 95,000 homes per year, indicating that a big increase in demand support is likely to be necessary.

As for affordability for social tenants and renters – this could be boosted by substantial investments in council housing and increases in grant funding for affordable housing, which would quickly increase demand for low cost new homes through housing associations.

As a key part of the housing supply chain, we speak to developers large and small all the time, as well as to others in our part of the supply chain. And looking at the sector from the perspective of those developers and for the broader housing supply chain, (some of whom are increasingly cash constrained and most of us not looking forward to the cost impact of the increases in employers NI payments), the priorities remain to get the housing market moving and get the sector building.

This research by Savills and the National Housing Federation places useful focus on some of the support the industry needs: relaxations to some planning restrictions, a replacement for the Help to Buy scheme to support first time buyers into the market, and investment in social and other rented housing models, these all have their place. But let’s get them moving!

James Scott
Managing Director