Housing: assessing the market

An holistic approach to the housing shortage

18 July 2018

The Barker Review 2004 analysed the UK’s housing shortage and recommended measures to tackle it. Jan Ambrose asks why there is still a deficit and considers problems and possible solutions identified by RICS

In 2003, Kate Barker, a member of the Bank of England’s Monetary Policy Committee, was asked to review the UK housing market. She considered the reasons for the lack of supply and the market’s inability to respond, as well as the role of the housebuilding industry, its levels of competition, capacity, technology and finance. The Barker Review was published in March 2004.

What happened next?

There have been four UK general elections since the review was published – in 2005, 2010, 2015 and 2017. It wasn’t until 2010 that housing supply soared up the political agenda, with the major parties outdoing each other with unfulfilled promises to build huge numbers of houses each year. But as property professionals have pointed out, governments do not build houses, and given archaic planning systems and a major decline in the construction industry workforce, there is still a severe shortage of affordable homes.

UK homeownership is at its lowest for 30 years, while those aged 16–34 are paying hefty rent rather than finding an enormous deposit and making eye-watering monthly mortgage repayments for the foreseeable future. The number of young adults staying at home with mum and dad is at an all-time high, and the UK population is ageing, with many over-55s choosing to remain in homes that are far too large for their needs.

What is RICS’ view?

In January 2018, RICS London Policy Manager Abdul Choudhury circulated a paper summarising issues affecting UK housing for discussion by RICS’ Housing Supply Group. This enables RICS’ External Affairs Team to identify problems and recommend solutions to the government based on input from members and the wider industry.

RICS is concerned that existing measures to address the housing deficit are too demand-driven. The residential paper aims to identify some viable supply-side policies that government could pursue.

Things have moved on since the Barker Review highlighted the UK’s housing shortage, but the same issues persist

It wants to address the problems across housing supply, renting and letting, re-use of existing property, construction skills and technology, rural, the devolved nations, and the ageing population. RICS believes that expanding supply across all tenures would mean building for the vulnerable and less well off, young professionals in Generation Rent, those in sparse lower-density rural areas and a growing elderly population.

Former Prime Minister David Cameron famously said that if he could have found the button in Number 10 to increase housebuilding, he would have pressed it repeatedly. RICS believes there are multiple buttons that could be pressed, and each should be used. All property professionals should work with investors, planners, designers, developers and constructors to recognise the diversity of demand, and develop models to suit every demographic.

Ageing population

In 2011, the proportion of those older than 65 in the UK was 16.8%, and this is estimated to rise to 23.5% by 2050. Legal & General’s report on last-time buyers found that around 3.3m homeowners older than 55 with collective access to £820bn of property assets were looking to downsize. The report also found that some 7.7m spare bedrooms were not being used. RICS believes there need to be incentives to downsize and also wants to publicise alternative ownership models, such as shared ownership and cooperative housing.

The quality of homes has a substantial impact on health: management of existing stock and low-level spending on adaptation measures must be urgently considered, together with a focus on elderly people who don’t have money locked up in property. Social and affordable housing are under huge pressure, and the private rented sector is becoming increasingly unaffordable.

Barker review findings

Barker review

The major developer’s view

Andrew Taylor of Taylor Wimpey says that in his experience, the main issue relating to housing provision is the lethargic and politically stunted planning system, particularly where locally elected council members make decisions at planning committee. Another significant issue is the delay in planning departments dealing with essential pre-commencement conditions.

There is a range of tenures on offer owing to the obligation to provide affordable housing, but planning and speed of delivery remain a huge stumbling block. Once these are remedied, a greater housing supply could stabilise prices. He is adamant that unimplemented planning permissions are not an issue, and maintains that section 106 agreements are the most appropriate way to provide social and affordable housing.

RICS believes that all property professionals should work with investors, planners, designers, developers and constructors to recognise the diversity of demand, and develop models to suit every demographic

He also thinks that small builders are making a comeback but that they need more support. However, his organisation is increasing production through greater use of timber-frame construction, which is recognised throughout the profession as being faster than traditional methods. Higher interest rates could cause a downturn, but the use of stamp duty or any other taxation is not a way to control the market.

Responding to other comments from the housing supply group, he agrees that the suggestion that buyers pay for the cost of construction is worth pursuing; but who buys the land? This could be a model for housing associations to follow. A long-term tenancy where the landlord can sell or occupy the property themselves is unsustainable and would give occupiers little or no security of tenure. The suggestion of capital gains tax as a way of funding infrastructure is inappropriate when Community Infrastructure Levy exists for that purpose. Taylor is, however, in favour of a higher planning fee in line with the cost of processing an application, but only provided that local planning authorities adhere to strict performance criteria.

RICS members can help

The more things change, the more they stay the same. Things have moved on in the 14 years since the Barker Review highlighted problems and possible solutions to the lack of supply in the UK housing market. Yet despite election pledges the same issues persist, although the situation has deteriorated.

RICS members are in an excellent position to help arrest this decline, given their experience and ability to influence government policy. Your involvement is essential to combat this situation for current and future generations alike. We’re asking members to consider the following questions.

  • What is your experience, so that RICS is not replicating existing work?
  • What are workable solutions and recommendations to develop the agenda?
  • What homes are needed for an ageing population, bearing in mind people are working longer and having more diverse employment in later life? And how can we build more of them?
  • How do we adapt or develop existing and new housing models to support an ageing population?
  • What are the existing incentives and disincentives for downsizing? What new mechanisms can be created?

Jan Ambrose is Editor of the Residential section of RICS Property Journal

Further information