Building more homes won’t solve the housing crisis
By Jo Eccles
Q: What impact will the Housing White Paper have?
A: The Housing White Paper focused on two main points: Firstly, the government’s support for building more new homes for sale and secondly, their commitment to the private rented sector (PRS).
With regards to building more new homes for sale, I personally don’t think this will have much of an effect if you’re a struggling buyer. A lot of buyers are not able to get onto the housing ladder, or move up or down it, because they can’t afford to save a big enough deposit for the purchase, or cover the high costs of moving, such as transaction costs. In my opinion, the White Paper misses the point as the barrier to buying is not availability, its affordability.
The only way building more new homes would make a genuine difference is if new homes were built that flooded the market and reduced the value of existing housing supply. However, that is never going to happen as house builders wouldn’t (and probably can’t) build enough to risk that, and no bank would lend against the new building if that was the potential consequence.
While the government is continuing to provide some initiatives such as ‘Help to Buy’, this particular scheme only helps a relatively small group of people to get onto an inflated and very expensive housing ladder. They do not address or counteract the underlying affordability problem. And therefore, buying a property will remain just as unaffordable for large majorities of the population.
On the private rented sector side, it is encouraging that PRS was a focus of the Paper. PRS is essentially where institutional investors build rental schemes which are professionally managed and usually come with benefits such as broadband and bills included etc. Due to the fact they are designed with specific tenant profiles in mind, the space, furnishing and style of living is tailored to those tenant profiles and tenants can remain in place for as long as they want.
However, PRS needs to be a bigger focus in order to make renting a viable and genuinely attractive alternative to buying. Individual landlords are often constrained to offering relatively short term tenancies of no more than a year or two at a time. This can be due to a number of reasons for example, buy to let mortgage constraints on the length of tenancies they can commit to, or their own personal circumstances that may see them move back to the property themselves or want to use the value of their property for other things. That is why institutional investment into building appropriate and professionally managed housing stock which permits very long term tenancies will be key to improving the options for tenants.
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