Jeremy's Blog 20th May: Housing
This article by Jeremy Moody first appeared in the CAAV e-Briefing of 19th May 2022
Alongside food and energy, housing is part of “the cost of living crisis”. It poses a particular potent threat to the Government which, now with limited time to the next election, looks to answers for England in the Levelling Up and Renters Reform Bills. It may be disappointed as, having abandoned its recasting of the planning system, these seem to focus on symptoms, not causes.
Pressures of prices, rents and affordability can be seen from Germany to Canada with the Irish Republic in more difficulty. Nonetheless and unlike food and energy prices largely set in international markets, more of housing policy is under domestic policy control.
Since 2015, tax changes and regulations have put increasing pressure on the private let sector, previously seen as part of the answer. It is now shrinking, seeing rents rise with 28 said to be seeking each property. The Renters Reform Bill (and proposals in Scotland) while responding to tenants’ insecurity look to add to that pressure, Michael Gove saying:
“We need to shrink the private rented sector and get more people owning their own homes.” (Sunday Telegraph, 8th May 2022)
Shuffling houses between sectors might not be an answer, less so as many of those houses are moving to holiday lets, adding to scarcity especially in areas like Cornwall. London has extreme pressures and some rented housing is poor but this strains the limited housing of rural areas.
With the average age at first buying now risen to 34, many may never buy. For 20 years, 300,000 new dwellings have been seen as needed each year. For many of those years we have not managed half that. Michael Gove, seeming to ease away from that target, is reported to see housing finance as a larger factor in rising prices than shortage of supply. Ultra-low interest rates are clearly a factor and Help to Buy has added fuel to the fire but banking regulation has made getting a mortgage harder and increased the deposits needed. This circle seems hard to square.
The Government’s quagmire over planning policy sees its present voters resist the housing that will assist its future voters. So it uses ways round the main planning system. The proposed rent auctions of empty commercial property may encourage its conversion to dwellings under England’s permitted development rights. New towns may be the Government’s larger answer. The Levelling Up Bill offers “locally-led new town development corporations”, perhaps drawing on the Letwin review, but it is not yet clear why they should be used. Not knowing if the design code may add to costs and the new levy risk deterring land coming forward, we await the new NPPF.
As no one cuts this Gordian knot and Government works round the system, nutrient neutrality is now reported to be delaying 100,000 new houses.