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Why We Can't Build Enough Homes And Why That Matters

Decades of below-par building statistics mean we could soon be paying even more for homes.

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I do not believe that continuing at the current rate of housebuilding is a realistic option, unless we are prepared to accept increasing problems of homelessness, affordability and social division ... and increasing the costs of doing business in the UK – hampering our economic success.

Population increases and household-size decreases mean we need more houses for more people (and fewer people are living in each individual home).

The Department for Communities and Local Government forecast in 2013 that over the following eight years England would need 221,000 new homes built each year to match demand, while the UK as a whole would need 260,000 new homes annually.

Even if we had no population growth in England, couples shacking up together would still mean we'd add 7,000 households to the total each year.

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And that's causing a problem: an undersupply of new houses.

Estate agency Savills warned last year that some parts of the country face "an acute shortage of housing".

Living in London? There'll be a predicted shortfall of 72,000 homes in the next five years.

So how many homes are we building? Not enough.

DCLG/Construction Products Association

Not the 260,000 a year we need, to put it politely.

“The UK is still building way below the number of homes we need," says Neil Smith of the National House Building Council.

Dr Noble Francis, economics director at the Construction Products Association (CPA), a housebuilding trade body, says: "The problem in housebuilding has been a consistent chronic undersupply going back 30 years. Even at the pre-recession recent peak of housebuilding in 2007 we were not building enough."

Why can't we build more new homes?

There are various underlying reasons, from top-down planning and strategic problems to bottom-up supply scarcities.

For a start, there's not much in the way of new council or housing association properties.

Lyons Review / Via yourbritain.org.uk

Local authorities hardly build houses any more (in 1999, councils across the country built just 50), and housing associations cannot build at large scale beyond 20,000 or so homes a year.

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A new government-commissioned report suggests that councils could be playing a far bigger role in housebuilding.

"We believe that councils could achieve much more by taking a more central role in providing new homes," the report says. "Our key recommendation is that councils change: from being statutory providers to being Housing Delivery Enablers."

In short, councils should take the lead in making housebuilding happen any way they can.

But that's simply a suggestion, not legislation. Though the government has accepted some of the new report's recommendations, it'll take some time to trickle through.

As in the past, for the foreseeable future it's therefore left to private business to replenish our housing stock. And that's problematic.

Planning law has made it more difficult to build houses, pushing smaller housebuilders out of the market.

gov.uk

Planning regulations have become more stringent, resulting in it becoming more difficult for builders to turn around homes quickly. Smaller companies who need a constant cashflow from new builds to stay in business can't afford to deal with protracted planning periods.

"Major housebuilders have five to seven years [ownership over] land, which they report that they need to hold to deal with the lengthy time it takes to get appropriate planning for developments," says Francis.

"Their business model is able to deal with an inefficient planning system."

And yet there's lots of land to build on in the UK.

KPMG/Shelter

Most people surveyed believe that significant chunks of Britain are concreted over in development. In fact, just over 1% of the entire land mass of the UK is allocated to homes.

England's a green and pleasant land, yes, but we can probably afford to be a little less green so more people can live pleasantly.

But housebuilding firms at all ends of the scale have become more scarce.

NHBC Foundation

As well as the huge drop in small housebuilders, the number of larger regional firms building up to 2,000 homes a year dropped from 260 in 1988 to 95 in 2013, while there are fewer than 10 national housebuilders now, compared to 13 in the late 1980s.

As a result, more than half the new houses built today are constructed by the big builders. In the late 1980s it was small builders who were responsible for two-thirds of the growth.

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Builders are also dealing with a shortage of materials and skilled labour.

Construction Products Association / Via constructionproducts.org.uk

We need more bricks – and people skilled enough to lay them properly.

The rate of new housebuilding dropped 52% between 2007 and 2009. That significant drop in building had huge ramifications in the construction industry and meant people left the industry.

We're still dealing with the consequences five years on. Even before the recession we weren't meeting the 260,000 minimum new homes a year the UK requires.

"A considerable degree of capacity has been lost on the skills and materials side," says Francis.

Around 4 in 10 contractors building homes say they can't find enough bricklayers or carpenters to construct the frameworks for new houses. More than a third of housebuilders can't recruit enough plasterers to skim the walls.

"In terms of whether it has actually held back housebuilding, it is difficult to measure," Francis adds. "Anecdotal cases abound at the moment but I tend to stick to what the data are indicating."

We need more homes because of the implications to all of us.

If there aren't enough homes to go around, the three problems Kate Barker mentioned in her review of the housing market – crises of homelessness, affordability, and social division – could get worse.

But even though house prices are already expensive, they could soon balloon to crazy levels.

Nationwide / Via nationwide.co.uk

A report by KPMG for Shelter released in May 2014 raised concerns that unless new houses are built, the average price for a home in 2034 could be over £900,000 – more than four times the average price today.

And at those prices, the housing ladder would look a lot more like a housing mountain.

Chris is a freelance writer for BuzzFeed, The Economist, The Sunday Times and the BBC, based in the UK.

Contact Chris Stokel-Walker at chris@stokel-walker.co.uk.

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