New homes being built rises by 15% (but what does that mean?)

Cilla Black might not be around to say it any more, but ‘Surprise Surprise!’... or rather, not. You guessed it, official housing data revealed once again this week that, thanks to decades of mismanagement by successive governments, the country still isn’t building enough homes.

Not that it seemed that way on the surface. Some of the headline stats in the
Government report appeared fairly robust...

  • Annual housing supply in England came in at 217,350 new homes in 2016-17, up 15% on 2015-16.
  • The 217,350 net additions in 2016-17 resulted from 183,570 new build homes, and 37,190 gains from change of use between non-domestic and residential
  • 18,887 of the net additions from change of use were through ‘permitted development rights’ (full planning permission not required)

Not so fandabidozi after all

But while the headline statistics appear fandabidozi at first glance, look a
little closer and they’re really not that great at all. In reality, the big
headline figure — 217,350 new homes built — was roughly 6,000 less than the
number of homes created at the start of the financial crisis in 2007/8. This
despite massive house price growth over the past decade driving developers’
profit margins.

Not enough homes, of course, means weak supply, which means prices can’t come
down as much as many — especially those seeking to get a first leg on the ladder
— wish they would. The result? Well, you’re paying more for your home than you
should be, having to borrow more than you want to, and sweating more than
Theresa May at an EU summit if you’re tied into a bad mortgage deal.

Hammond has ‘land banking’ in his sights

But wait a minute. Maybe, just maybe, the current Government is finally going to
do something about it and get the country building the homes we need? We’ve yet
to see the small print of this month’s Budget, of course, but one of the bigger
leaks so far is that Philip Hammond has his sights set on building 300,000 new
homes a year — some 80,000 more homes than were built in 2016-17.

The Chancellor will do this, we’re told, firstly by clamping down on companies,
typically speculators and bigger developers, that ‘land bank’ (sit on land and
wait for it to appreciate in value before developing it at an event greater
profit). Land banking has proved to be a major hindrance to the efforts of
countless governments over the years and it will be fascinating to see how Mr
Hammond attempts to address it.

He’ll also potentially look at underwriting loans to the ranks of smaller house
builders who are increasingly active. These companies at least want to build,
but often find it harder to get the finance they need to do so. And Mr Hammond’s
other focus, we’re told, will be on local authorities, who are often guilty of
blocking or holding up viable developments.

Now we’ve been given countless promises before, of course, but for now, let’s
give Mr Hammond the benefit of the doubt — and believe.

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