All the main parties tell us that housebuilding is a high priority for them, but none come close to the ambition needed to address the housing backlog
Housebuilding was always going to be a touchstone issue for the 2015 election and with the Conservative Party resurrecting its right to buy policy, it will provide even more opportunities for parties to highlight contrasting approaches to an intractable problem.
One thing that is not in doubt is that we are not building enough houses. Housing completions remain 35% below levels seen at the last market peak in 2007. All parties have pledged a significant increase in supply by 2020. The question is both whether the targets are ambitious enough and whether the industry will respond if they are increased.
Production of affordable housing may be at levels close to the long-term average, but with the housing benefit bill touching £25bn in 2013/14, it is increasingly obvious that radical changes to the housing mix are needed as well as an increase in supply.
Ironically, given the level of support provided to the for-sale housebuilding industry, through planning reform, low interest rates and Help to Buy, it is nevertheless the private sector that is lagging in the delivery of new supply. The 112,000 units delivered in 2013/14 were 40% down on the number completed in 2006/07. Clearly high prices have affected demand, but perhaps there are fewer buyers for homes now than in previous cycles.
The construction of 10,000 extra affordable rent homes is unlikely to make much of a dent on the housing benefit bill
Against this backdrop, the main parties have all placed housing as a high priority. Labour will set out to implement many aspects of the well-received Lyons Housing Review, including mechanisms for land assembly, greater diversity in delivery, including support to SMEs, and help to first-time buyers through prioritisation of sales.
Investment to support the land assembly, infrastructure and affordable housing delivery envisaged under Lyons is of course critical. The Labour Party proposes a Future Homes Fund channelling receipts from Help to Buy ISAs. It is unrealistic to expect that the long-term funding requirements for land assembly, infrastructure and affordable rented housing can be supported through short-term savings, so Labour’s mixed funding solution highlights the challenge facing all future investment - even in areas as critical as affordable housing.
The Liberal Democrats also take a detailed approach to their housing policies - presenting a shopping list which includes a 15-year planning horizon, the capture of development value through planning, the mapping of housing need to the actual needs of local people and the outlawing of “buy to leave” - where foreign investors buy homes but keep them empty - as well as the development of innovative tenure mixes to subsidise affordable housing. Like all major parties, they share a commitment to promoting garden cities. With proposals for a housing investment bank, longer-term planning of housing supply and a more active role for the public sector in delivery, Liberal Democrat policies are far-reaching and are certainly the most ambitious with respect to the numbers delivered. The number they pledge - 300,000 per year - were last delivered in 1977.
Ironically, given the level of support provided to the for-sale housebuilding industry, through planning reform, low interest rates and Help to Buy, it is the private sector that is lagging in the delivery of new supply
The Tory Party’s commitment to home ownership - exemplified by the right-to-buy - represents a conscious choice to pursue a narrow range of policies focused on homes for sale. The construction of 10,000 extra affordable rent homes is unlikely to make much of a dent on the housing benefit bill, and disappointingly, the private rental sector - which now houses nearly half of 24-34 year olds - is barely mentioned. What the market needs is the professionalisation of the rental sector and the introduction of new sources of supply - such as institutional providers. The 2015 election may be seen in a few years’ time as a missed opportunity to promote private rental as a tenure of choice. For now, it’s an expensive and short-term solution.
In summary, party commitments on housing represent a missed opportunity, but probably few missed votes. Targets set by the two main parties for new housing lack ambition and do not even start to address the housing backlog. Current high house prices support high land values, even though production levels are well down. Expensive land has become a barrier to the establishment of viable rental tenures or the delivery of affordable housing. Politicians intervene in markets at their peril but the housebuilding industry has been the beneficiary of substantial support. Coalition or minority government negotiations may be the last opportunity to introduce some genuinely fresh thinking. Let’s hope that our politicians are really up to the job.
Simon Rawlinson is head of strategic research and insight at EC Harris