Online estate agent Tepilo looks at a government review into what could be done to increase the speed at which new homes are built.
It’s been a frequent complaint in recent years that not enough homes are being built to meet rising demand, which has in turn pushed house prices up and made it increasingly difficult for people – in particular, young first-time buyers – to get on the property ladder.
The government, recognising this problem, commissioned Sir Oliver Letwin – the MP for West Dorset and a former Cabinet and shadow cabinet minister – to carry out a review of the housebuilding process in Britain. The aim was to see how new homes could be built more quickly and how thousands more British bricklayers could be trained to help meet government targets.
A speedier process
Letwin was urged to examine what could be done to speed up the slow rate of housebuilding at major sites. His analysis, which was published in late June, found that developers are slowing the system down by deliberately restricting the number of newly built homes that are released for sale at any one time.
Known as the ‘absorption rate’, this practice is employed to prevent a surplus of new homes which then drive down prices in the local market as the gap between demand and supply narrows.
The report, however, suggests that the rate at which new homes are built could be accelerated if developers increased the choice of design, size and tenure on offer. This, in turn, would speed up the process of homes being built and also sold.
A shortage of British bricklayers
A lack of qualified British bricklayers is also an obstacle to the government’s ambitious housebuilding targets, the analysis suggested. According to the report, such a shortage will have a ‘significant biting constraint’ on the government’s proposals to increase the number of new homes built from 220,000 a year to 300,000 by the mid-2020s.
The report called for 15,000 more British bricklayers to be trained over the next five years to meet the shortfall, which is nearly a quarter of the size of the current workforce.
The study said that to “raise production of new homes from about 220,000 to about 300,000”, the government and major house-builders need to work together on a five year 'flash' programme of ‘pure on the job training’.
To come to their conclusions, Letwin and his expert panel visited 15 large sites – of between 1,000 and 15,000 homes – in areas of high demand in London, the South East, West Midlands and the North West. Letwin and his panel will submit final recommendations on improving build-out rates in the autumn, as part of the government’s wide-ranging plans to ‘deliver a housing market fit for the future and build the homes that communities need’. The already published draft analysis can be viewed here.
‘Absorption rate’ the main cause of delay
When announcing the report’s findings, Letwin thanked everyone who had contributed towards the independent Review Panel's work to date in analysing all possible reasons behind the slow build-out of housing sites. “It is clear that the main cause for delay is the absorption rate,” he said. “We found that if house-builders were to offer more variety of homes and in more distinct settings then overall build-out rates could be substantially accelerated.”
The Housing Secretary James Brokenshire said the government was working hard to help people onto the property ladder. He said he was especially interested to see that growing the choice of design, size and tenure of new homes might possibly help to speed up build out rates and help deliver the homes the country is crying out for.
This isn’t the first time, of course, that the government has shone a spotlight on housing. In February 2017 the government released its Housing White Paper after months of delays. Titled “Fixing our broken housing market”, it laid out the government’s plans to reform the housing market and up the supply of new homes in England. It included proposals to amend the planning system, an extension of Right to Buy, the introduction of the Lifetime ISA and further investment into the Affordable Homes Programme.
Little has been heard about it since, with no clear idea of whether any of the proposals outlined in the Housing White Paper have been properly enacted. The government has continued to place a key emphasis on Help to Buy, Shared Ownership and Starter Homes as a way of helping first-time buyers, but all these schemes have proved controversial. There has been a low take-up and lack of awareness of Shared Ownership, while the Starter Homes scheme is yet to get off the ground.
What’s more, the accounts on offer to help first-time buyers – specifically the Help to Buy ISA and Lifetime ISA – haven’t been without their critics, with the latter in particular receiving a very frosty reception from high street banks and lenders over fears of a mis-selling scandal on the scale of PPI.
So, while the government calling for a review into housebuilding is encouraging, and Letwin’s proposals seem to make sense, turning words into actions will be needed if the government is to meet its ambitious housebuilding targets – and, more to the point, to have enough qualified people in place to actually build the homes.