Prioritising supply-side policies is the key to resolving the UK housing crisis

The housing crisis in Britain, particularly in the better-off areas of Greater London and the South East, is extremely severe. Throughout England, the average house price exceeds ten times the average salary, vacancy rates are less than one percent, and the living space per person for private renters has significantly decreased in recent years.

Compared to the average European country, Britain currently faces a significant shortage of 4.3 million homes that were never constructed and are absent from the national housing market. Statistics confirm over 1m new households, international students, economic migrants, and other migrants arrived. Even if the government manages to achieve its current target of building 300,000 homes per year, it would still take at least fifty years to address this housing deficit. However, if the goal is to tackle the problem faster, it would require the construction of 442,000 homes annually over the next 25 years or 654,000 homes per year over the next decade in England alone.

Housing crisis in England

A shortage of housing supply primarily causes the housing crisis in England. To address this issue, the UK government should focus on the supply side of the problem. This means building more houses, but it requires both available land and incentives for construction.

The current housing policy in the UK needs to change to overcome the inertia hindering new home construction and the fact that arguably the UK has an increasingly complex and sometimes rather random planning system and NIMBYism afoot. While demand-side policies may be politically convenient, they are ultimately ineffective because the root cause of the housing affordability crisis lies in the insufficient housing supply, which cannot respond adequately to increasing demand which is driving rents to in affordable levels that will linger long after the oil price and normal inflation has got under control. People are living in smaller properties and making compromises such as to live further away from where they want to be.

A comprehensive range of measures is necessary to tackle the issues of affordable rented homes and homelessness. There is a consensus among experts and policymakers that increasing the supply of affordable housing is the only way of resolving the problem. Whilst welcome, the real answer is to increase the supply of all housing across the board, perhaps with the exception of trophy homes.

Yet, simply boosting the housing supply without considering other factors will not solve the problems of high house prices and low home ownership. It is crucial also to prioritise the quality of new homes (meaning the consumer deserves homes that are more energy efficient and cheaper to run - the so-called 'low-bill homes'), as well as the affordability of existing ones. On the supply side, several critical shortcomings need to be addressed. These include the urgent need for more affordable and genuinely social housing and addressing existing housing conditions by investing in private housing maintenance and improvement.

Affordable Homes

Approximately half of the affordable housing is provided by developers through section 106 planning agreements on new private estates and within new build blocks of flats. However, there are concerns about the potential impact of replacing the section 106 planning gain system with a national infrastructure levy; several pundits believe the alternative could result in even fewer social housing units being built in the future.

There is a pressing need to construct affordable homes consistently for the next five years, with a fair number of such homes allocated for social rent. Social rent refers to the lowest-cost housing provided by councils and housing associations, with rents tied to local incomes. However, in recent times, the number of new homes in this category built in England has been significantly lower. The EPC improvement to grade C will deplete social sector reserves for some years as they grapple with aging and energy-efficient stock.

House Construction

Enhancing the predictability of the planning process and ensuring an ample supply of land for development is crucial for facilitating significant growth in housing construction, whether undertaken by private entities or the government. The fundamental idea behind any new planning reform suggestions should revolve around transitioning from an unpredictable, case-specific decision-making approach to a system where development is considered permissible as long as it adheres to established regulations.

Addressing the chronic shortage of homes at all rent levels is crucial to solving the affordability crisis. Genuinely affordable homes are necessary, as they play a key role in tackling the housing emergency and continual drain on public resources wasted on temporary housing in hotels and the like

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