
As the UK property market shows promising signs in the wake of a Labour victory and decreased interest rates by the Bank of England, one problem continues to pose a huge challenge.
Over the last few decades the UK has fallen far behind other wealthy nations in Europe when it comes to building new homes, driving a severe shortage that has wide-reaching repercussions for the property market and its potential buyers.
An analysis by Bloomberg found that the failure to keep housing production on track has led to 4.3 million missing homes, roughly five decades of production, which is greater than the number of current existing dwellings in all of London.
The crisis is only intensifying, with population growth out-pacing housing completions at the fastest rate since the 1940s, and average house prices across the UK soaring almost 70% in the last 15 years, making it impossible for many young Britons to join the property ladder.
Below we break down how the Labour government attempts to tackle the housing crisis and what that means for the UK property market.
What went wrong?
The UK’s sluggish housing development has largely been blamed on the country’s development planning protocol dating to the late 1940s, when a system was introduced that required permission to build from a planning authority controlled by local residents. This makes it difficult to propose building even in places where new homes are allowed thanks to a ‘not in my backyard’ mentality of local residents.
Around the same time, amid concerns about urban sprawl, protected ‘green belts’ were created around cities to restrict development. Established more than 70 years ago, the green belts cover about 13% of England and aimed to limit the growth of large built-up areas, or large towns merging into one another.
Today there is huge variation around where new homes are being built, with the vast majority of development happening either in city centres or on the very edges of cities. Meanwhile, half of all suburban neighbourhoods build less than one home each year as a result of the current system.
As a result the housing shortage has made it difficult for people to relocate for good jobs and for companies to attract talented workers in certain areas. With so many people unable to access suitable housing there is an increase in overcrowding, young people being forced to live with their parents for longer, impaired labour mobility and a difficulty for existing homeowners to level up and grow with their changing needs.
Labour’s plans
To address the market’s growing need for homes, the Labour party has vowed to build 1.5 million houses over the next five years, a rate of house building last seen in the 1960s.
Part of the government's strategy is to build new towns by expanding small communities or establishing settlements, reviving an idea from the 1940s. Within days of gaining office this year, Britain’s finance minister Rachel Reeves announced that the government would be stepping in to unblock many major stalled housing projects plaguing the market.
To overcome the issue of public resistance the government has reintroduced mandatory building targets for local authorities that will cumulatively aim to deliver 370,000 homes a year. Officials have said they will rely on private developers, not on local councils, which were key contributors in the past.
In another new development, some low-quality ‘green belt’ land will be freed up to become part of a 'grey belt' to allow new homes to be built. The government has previously described the ‘grey belt’ as ‘poor quality and ugly areas’ on parts of protected land. These include land on the edge of existing settlements or roads, as well as old petrol stations and car parks.
Even with the new changes Labour’s proposed number of new houses is a daunting task to undertake, particularly when previous governments have failed at the same task. The Conservatives vowed in 2019 to get housebuilding up to 300,000 a year by the mid-2020s, but builders have never delivered more than 250,000 new homes a year.
This means that the house shortage is here to stay for the foreseeable future, along with propped up home prices for buyers.
As always it is highly recommended to consult with a professional to ensure you navigate the current property market and its potential challenges and opportunities accurately. Tailor my Property has a professional network of financial, property and investment specialists who are able to assist, advise and tailor a strategy suited to your individual needs.
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