Earlier in the week we touched on the new Buy-to-let rules announced in the Autumn Statement. The other major announcement from George Osborne was that he has launched “the biggest house building programme since the 1970s”.
Osborne’s promise to tackle the “crisis in home ownership” in Britain was put at the heart of a five-year economic plan;
- He committed to the building of more than 400,000 new homes throughout England. This £6.9bn programme will see the government back a range of schemes to help people buy their own homes, and mark a switch from support from rented housing to home ownership.
- The plans include some £2.3bn paid to developers to build 200,000 “starter homes” for first time buyers over the next 5 years, who will receive a 20% discount on prices up to £450,000 in London and £250,000 in the regions.
- Another £4bn will be allocated to developers, housing associations and local authorities to build 135,000 shared ownership homes for households earning less than £80,000. Current restrictions on those who can buy a home through shared ownership would be removed from April 2016. Currently, homes for shared ownership are allocated in different ways, including criteria set by local councils, but the chancellor’s move will mean anyone who has a household income of less than £80,000 outside London, and £90,000 inside London, can buy a home through shared ownership. The scheme will allow people to buy between 25% and 75% of a home, and ensure that the rent on the rest of the property will not be more than 3% of the amount left.
- There will also be £200m for 10,000 new homes that tenants can live in for five years as they save for a deposit and £400m to build 8,000 homes for the elderly and disabled.
- £400m to be invested in homes for older people and those with disabilities is certainly a welcome measure in an area currently under-funded and with a massive demand/supply imbalance.
- This huge investment in Starter Homes and shared ownership is designed to encourage people to switch from renting to buying. No doubt it will be successful to an extent, however, it does raise some queries;
- Although there might be an initial easing at the starter end of the housing market, the fact that these properties can be sold in five years at market rate could be seen as a big tax-free cash lump sum for those able to buy them.
- Are these 400,000 extra homes or just a substitute for the properties that were due to be built anyway?
- While new homes for sale are welcome, what about the 1.4 million households on social housing lists who want to rent, there is no investment in properties to rent?
- We have been told over the past decade that the UK needs 300,000 new houses a year to meet demand. For the past 5+ years the actual supply has fallen well short of this demand. The figure of 400,000 new homes over 5 years is 80,000 per year on average; there is still an apparent imbalance in supply and demand.
- Most importantly, do we have the skilled workers to actually deliver these homes? I doubt it. According to specialist recruiter Randstad, the UK housebuilding sector needs a workforce of nearly 2m to keep up with housing demands. If these new homes are to be built over the next 5 years the industry will need recruit at least a million more workers. And this industry suffers problems of an ageing workforce with 12 per cent of construction workers already aged 60 or over.
Without a doubt the intentions are good for the longer term stability of the UK housing market. How effecective these intentions are, remains to be seen.