UK Housing Market - The Housing Shortage
For many years it has been clear that not enough new homes are being built each year in the UK.
The Government is concerned that there have not been enough homes built to meet the needs of a growing and ageing population. Its aim is to increase the supply of both new-builds and repurposed empty homes. In 2012 a total of 118,190 new build dwellings were completed in England, which was an increase of 9% on the previous year, but a 31% decrease on the peak of 170,610 in 2008. Only 610,000 new homes have been completed in the last five years, relative to nearly 800,000 in the preceding five, a drop of 23%.
This constraint on new housing supply has seen house prices remain relatively stable over the last three years, despite the difficulty in buyers obtaining financing. 15% of the population is currently in the private rented sector and that figure is expected to double over the next 10 years
The elasticity of housing supply in the UK is low – one of the lowest in Europe – current policy is focused on improving the elasticity of supply so that house building is more responsive to changes in market demand.
- A loosening of planning restrictions: Relaxation of planning constraints for new housing – including relaxation of the greenbelt restrictions. There is no shortage of land in the UK, merely a shortage of land on which it is possible to build new homes.
- Building homes on brown-field sites: Financial incentives for construction companies to build on brown-field sites (e.g. previously developed land).
- Encouraging self-build schemes: Self-build homes work out cheaper in the long run and they give people the satisfaction of building a home to their own specification and design.
- Build more social housing: Allowing each local authority (council) greater freedom to borrow money to fund the construction and supply of social housing may help to reverse the collapse in the building of council properties over the last ten to twenty years. Increased funding for the 1,400 housing associations responsible for building and maintaining nearly 3 million homes in the UK is also an option.
- Increased innovation and productivity in house-building industry: Encouraging more innovation in the building industry – for example innovations that make it possible to build new homes attractively at higher densities (i.e. more properties per square acre).
- Reducing the number of empty homes – There are several options for this including compulsory purchase orders if owners of properties allow their properties to remain empty and unused for 6 months or more – these properties could then be made available to people on housing waiting lists at sub-market rents.
- Tax breaks for investors willing to make rented properties available at affordable rents.
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