Last year, the newly elected Conservative government set themselves several targets in an attempt to tackle the housing crisis and get more new homes built over the course of this parliament.
The numbers are ambitious. The Government says it wants a million new homes built in England by 2020. Of these, 400,000 will be “affordable” homes for purchase, focused on turning ‘generation rent’ into ‘generation buy’.
A number of new policies have been announced with the aim of significantly boosting new homes delivery. There is a target to build 200,000 Starter Homes, which will be sold at 20 per cent discount to first-time buyers under the age of 40. The criteria for shared ownership schemes, where buyers purchase a portion of a home and pay rent on the remainder, will be broadened to enable the building of 135,000 new homes under this tenure.
In London, the Help to Buy scheme has been beefed up to enable buyers to obtain a 40 per cent equity loan on their purchase, up from the previous limit of 20 per cent, meaning that households with an annual income of £50,000 can potentially access home ownership in 20 of the capital’s 33 boroughs. In England, the scheme has been extended for the second time until 2021.
This is very welcome news for aspiring home owners with above-average incomes. But will the changes mean that more houses will be built?
Details on how these schemes will function and interact are still being finalised. However, our initial analysis suggests that there is an overlap between the parts of the market likely to be served by Help to Buy, Starter Homes and shared ownership. In London, these are households with annual incomes in the £45,000 to £90,000 range.
Replacing homes that would have been built anyway through existing routes will not provide additional homes. Furthermore, there is a risk that Starter Homes could distort the new homes market. Development schemes where there is a large number of Starter Homes for sale may have an impact on values of competing homes nearby.
In the year to March 2015, 170,000 new homes were delivered in England, including conversions. This is well below the 312,000 new homes we need a year according to the latest assessment from the Town and Country Planning Association.
The best way to boost housebuilding is to encourage a diversity of tenure, including homes for rent. We forecast that demand for rented homes will rise by 1.1 million over the next five years, even if the affordable homes target of 400,000 is met.
The housing crisis calls for ambitious targets, but we need policy with a broader focus.