Builders and developers say UK government will miss home construction targets

As yet another Housing Minister takes up the brief, research shows that the majority of house builders and developers believe that the Government is likely to miss building targets.

Some 86% think that the maximum achievable is 250,000 a year, well below the Government target of 300,000 a year by 2022, according to the annual house building report from real estate firm Knight Frank.

Just 1% of respondents, which include more than 100 developers that account for almost three quarters of all newly built homes across the country each year, think surpassing 300,000 additional homes each year is possible by 2022.

It highlights the task ahead for new Housing Minister Kit Malthouse, the 17th politician to hold the post in the last 20 years. There are concerns that a lack of continuity means that the housing sector is not being taken seriously enough in the face of the current Brexit onslaught.

And the optimism relating to the home building target comes despite 61% of those surveyed saying that they plan to increase the number of homes they build during the next 12 months. But there is a split between the outlook of larger house builders and SMEs.

Indeed, some 92% of large house builders, that is those that build over 1,000 homes per year, plan to increase construction starts this year, while only 57% of small developers intend to decrease activity or leave output unchanged.

The report also reveals that the future of the Help to Buy Equity Loan Scheme has become a topic of keen interest to house builders, many of whom are now embarking on building projects that will complete after 2021, when the scheme is scheduled to end.

Nearly half of respondents, some 46%, said that ending the Help to Buy scheme in 2021 would have a negative impact on the supply of homes they were able to deliver.

However, concerns that ending the Help to Buy Equity Loan scheme will affect housing delivery does not translate into a plea for Help to Buy to continue indefinitely. Two thirds said the scheme should end, although these were split between 50% who called for a tapered withdrawal of the scheme, 14% who said it should end completely at some point in 2021 and 36% who said that the scheme should continue indefinitely.

Planning is also an issue, but less so than previously. The Government is currently seeking methods to speed up delivery of housing via a review of build out rates currently being conducted by Sir Oliver Letwin, whose draft analysis report says that absorption rates are the key factor limiting the speed of house building in the country.

Although the Letwin review focusses on challenges after the planning process is complete, when asked about the barriers to speeding up development the survey respondents still identified planning as the biggest hurdle, with 39% identifying it as the top issue, although the proportion identifying the planning system as a hurdle has fallen since last year.

Justin Gaze, head of residential development land at Knight Frank, said:

‘Whatever ministers decide, they must speak up soon if they are to avoid weighing on the supply of homes. The industry has shown itself capable of adapting to change, but businesses in every sector strain to operate amid policy uncertainty.’

The survey also found that 55% believe that London Mayor Sadiq Khan’s affordable homes threshold of 35% could, if applied on a national basis, hinder the delivery of affordable homes, suggesting that any threshold would need to be set locally.

However, most respondents, some 62%, actually favoured a threshold approach to affordable housing, provided the target was set clearly and adhered to, due to its transparency and the likelihood it would make bidding for land more competitive.

When asked for opinions on Brexit, the majority said that that an uncertain economy was the greatest risk to their business, followed by labour availability and access to materials.

David Fenton, head of regional land at Knight Frank, said:

‘Nationwide, house building looks set to increase, underpinned by more evenly distributed house price growth and high levels of employment in regional cities. However, our survey indicates that scepticism prevails among house builders over whether it’s possible to deliver 300,000 additional homes a year, and ultimately they will only build what they can sell.

‘As our respondents have identified in the survey, the market is not without its challenges, and continued policy uncertainty has the potential to weigh on output in the coming years.’

The survey was done before the latest change in Housing Minister but the overall reaction has been one of despondency.

Nick Leeming, chairman of Jackson-Stops, said:

‘Home owners, house builders and those hopefuls amongst us will be left feeling disheartened and frustrated once again as the fourth housing minister in two years takes up the position.

‘It felt like slowly but surely Dominic Raab was starting to make a difference but less than seven months later we are once again left with a housing minister with very little housing experience. Quite frankly, with Brexit now less than a year away, it appears that Government is letting its focus on the UK property market fall by the wayside.

‘The combination of further economic uncertainty, the constant chopping and changing of housing ministers, punitive stamp duty charges and high moving costs is proving a major barrier to home ownership and something needs to change if we are to see the situation improve any time soon.’

The House Builders Association (HBA), the house building division of the National Federation of Builders (NFB), welcomed the appointment of Malthouse but hit out at the lack of consistent leadership.

Richard Beresford, chief executive of the NFB, said:

‘The housing crisis can only be solved with a consistent approach. We only hope that the new Minister for Housing shows an openness to solving the housing crisis and redoubles efforts to reform planning and make the housing market more competitive.’

Malthouse needs to show strong leadership in terms of housing and planning, according to the Country Land and Business Association (CLA). Its president Tim Breitmeyer said that positive development is too often held back by policies which do little to promote sustainable housing growth across rural areas.

Tim Breitmeyer said:

‘We welcome the fact that a rural MP is taking over this brief and I look forward to working with Mr Malthouse to ensure that landowners are part of the solution to help solve the rural housing crisis.’

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