_Budget 2018: Hammond Sees Solution to Affordability Conundrum in Housing Diversity

The government’s reliance on the large volume developers to reach its housebuilding target of 300,000 dwellings a year by the middle of the next decade meant it was always going to be a stretch.

November 02, 2018

Monday’s Budget demonstrated that the chancellor Phillip Hammond, at least in part, is coming to terms with that.

That’s not to say he’s ditched the target, even though he would do well to cast it off as the sole yardstick of success. However, there is clearly now recognition from policymakers and the chancellor that a diversity of housing providers, from councils and housing associations to retirement living and build to rent specialists, likely hold the key to unlocking the country’s affordability conundrum.

First that target. We should be ambitious, but the housing crisis has always been more about affordability and the right mix of homes in the right places. Policy needs to reflect that, rather than being solely geared largely to chase a big, bold number.

Take Help to Buy. Extending, while limiting the scheme to first time buyers and adding regional price caps provides much needed clarity. Approximately 170,000 homes have been bought through the scheme and 4 out of 5 purchasers were first time buyers. Meanwhile supply is up 74% since the 2013 launch, however through Help to Buy alone, hitting the 300,000 target by the middle of the next decades looks increasingly unlikely.

The Office for Budget Responsibility published its forecasts for construction alongside the Budget, suggesting net additional dwellings will hit 203,000 in 2018, rising to 246,000 in 2019, where it will plateau and remain in that region until the end of the forecast period in 2023. Yet the government’s latest tack of introducing sensible policies that may make modest but positive changes should be commended.

They include lifting the Housing Revenue Account borrowing cap, enabling councils to make real contributions to housebuilding. In the late 1970s, local authorities were building more than 100,000 homes a year. The OBR forecasts suggests a modest but welcome 20,000 extra council homes will be added by 2023.

Enabling developers to change empty shops into homes could also ease housing shortages a modest amount in areas with struggling high streets. Meanwhile, Homes England’s new five-year plan to use its land, money and influence to increase the pace and scale of housing delivery – particularly on the tricky sites that have fallen out of favour - could herald real results.

Lastly, the results of Sir Oliver Letwin’s review aimed at speeding up housebuilding. The government has rightly concluded that the large developers are not landbanking – their business model is selling homes, not holding land.

The report is varied and much of it will take time to digest, but it is his recommendations to encourage greater diversity of homes on large sites of 1,500 homes or more that are likely to both speed up delivery, while creating more homes that cater to growing needs for specialist retirement, student and rental housing, though if adopted they would require legislation and months of refining.

Smaller incremental changes may not grab the headlines, but they are effective.