Are we in the midst of an ‘affordable’ housing crisis?

Talk of housing shortages and the UK’s current ‘housing crisis’ is a topic that crops up regularly in the media, with discussions around new housing and homebuilding targets featuring prominently. With household budgets constantly being stretched by price increases for everyday essentials, it’s easy to understand why larger construction firms are currently building fewer houses. There’s little point investing in building new homes when people can’t afford to buy them. In the current financial climate, it’s clear there’s a severe lack of affordable housing and more needs to be done to address the situation.

The figures don’t add up

With the average UK salary working out at around £35,000 a year and the average UK house price being approximately £290,000, buyers simply can’t afford to purchase houses at the prices being set in the market. Add to that the fact that studies have shown it will take almost 10 years for first time buyers to save for a deposit, and it’s easy to see why people are struggling to get on the property ladder. Barratt Developments reported a fall in the building of new homes recently, blaming the decrease on higher interest rates and inflation deterring potential buyers, clearly highlighting the difficulties purchasers currently face.

It’s obvious that more needs to be done to address the shortage in affordable housing, but are the new Labour government going to be the ones to finally solve this issue? If history is anything to go by, they’ll certainly have their work cut out.

1.5 million homes in five years

The government’s target of building 1.5 million new homes within the next five years is ambitious by any standards and, if the Labour government are to achieve this, they’ll need to make some radical and brave decisions sooner rather than later. Just over a year ago, Keir Starmer stated at the Labour party conference that a Labour government would ‘get Britain building again’ with a plan to ‘bulldoze through’ red tape. With his party now in government, he has certainly set himself a challenging target.

Not since the 1960s have houses been built at such an ambitious rate and it’s worth remembering that, back then, the construction of new homes was generally carried out by local councils in the form of social housing. From the 1980s onwards, homebuilding has largely been left to the private sector, with social housing sold off as part of Right to Buy schemes.

Location, location, location

In order to get on the property ladder, buyers may need to manage their expectations to better reflect their financial situations. For many, this could involve having to rethink their choice of location and buy in areas where property is more affordable.

With a budget of £150,000, it’s possible to buy a two-bedroom apartment in Leicester, but if you work in London, you’ll be spending in excess of £200 a day on train fares, which is more than a little problematic. One solution could involve government subsided rail travel to enable those opting for cheaper housing further afield to commute to London, but whether this is a policy likely to be proposed remains to be seen.

The impact of flexible working

With working from home and the idea of flexible working becoming more commonplace, it’s now a viable option for first time buyers to get on the property ladder outside of London and commute in less frequently, whilst benefitting from a London job and salary. Perhaps this is an additional motivation behind introducing day one flexible working requests and, once the new employment act comes into force, I'm sure more and more listings on Rightmove will contain information about journey times into London.

A comprehensive approach

The temptation to try and solve the shortage in affordable housing with binary solutions, as with many important issues these days, appears to be the favoured solution, when what’s really required is a comprehensive and holistic approach. The powers that be need to show a greater understanding of what kind of housing should be provided in the market and, crucially, who should be responsible for providing those homes.

The major criticism of the idea that local government should build housing directly is the distinct lack of expertise in place to do so, with this in mind, partnerships with local developers, such as those undertaken by Homes England, encouraging developers to join their delivery partner dynamic purchasing system (DPS), should be welcomed.

Whatever steps the government decides to take towards tackling the affordable housing problem, it is clear that the issue requires a holistic and multifaceted approach if the target of 1.5 million homes within the next five years is to be met.

You can read more on Robin’s views in his latest article for Property Reporter.

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