Rapid expansion of the housebuilding industry puts the UK on track to deliver the Government’s target of one million new homes by 2020, but if we’re to improve affordability, we need to see many more new homes built each year.
In many parts of the country, supply is more or less meeting need, but in the high-demand London and South East regions there remains a crisis of supply. In 2015/16, the new homes shortfall in these markets stood at 104,000.
We need to think differently about the fundamentals of development if the number of new homes is going to increase to meet demand and have the effect of lowering prices to allow more people to access home ownership.
Much more land must be released, likely including green belt swaps, to allow more homes to be built out rapidly, and at lower price points. Policymakers will need to recognise that if developers sell lower-priced homes, they will capture less land value uplift, meaning there will be less potential to fund infrastructure and affordable homes through section 106 and CIL payments. This means that there will need to be much greater investment in infrastructure and different ways of funding much needed affordable housing.
Our map shows where affordability is most stretched, and where is it most difficult for those on a lower quartile income to climb onto the housing ladder.
Source: Savills Research
We have plotted house prices to earnings ratio (lower quartile in each case) at a local authority level and the annual income required to buy a 1,000-square-foot property (the size of an average three-bedroom family home). We have also calculated the percentage of households within that authority who have the income to buy that home.
In London and most of the South East, only 21 per cent of households in the lower quartile income bracket have the means to buy this average three-bedroom home. At the extreme, where the house-price-to-income ratio is in the 11.4 to 30.7 range, with the average income required at £68,000.
In Midlands and the North of England, affordability is much less stretched and there are markets where an average of 47 per cent of lower income households can, theoretically at least, afford to buy 1,000 square feet of home.