Despite the uncertainty of recent times amidst Brexit, it has not been all bad news for the housebuilding sector. We have witnessed efforts from the government to free up capital to encourage housebuilding, particularly in relation to housing associations, the availability of certain government land for building and recognition that planning restrictions can hold up development. We have also seen a more demand-led approach, particularly for first time buyers (according to some commentators up 50% in the last five years) and some success from the Help-to-Buy scheme which accounted for 44% of new build transactions.
Regardless of the recent successes, the sector is still facing a multitude of opportunities and challenges that need to be addressed. In our 2018 Property and Construction report, 82% of respondents stated that SDLT is the biggest tax barrier to growth for the industry. SDLT is problematic for the sector as it has substantially reduced transactions in the residential market, ultimately damaging liquidity and causing a reduction in housing developments and, therefore, supply. At the hands of SDLT, the affordability of housing has taken a hit and resulted in movement in the market to slow. Research has shown that people are now staying in their homes longer, with the average increasing from nine to 14 years, over a 10 year period.
Planning represents another challenge for the sector to tackle. In our survey, 77% of respondents stated that existing green belt planning restrictions are not conducive to increasing housing supply. It is natural that, if the planning system is too complex and restrictive, the hurdles to overcome in order to start developments will prove too much for many housebuilders.
If the government was to reduce SDLT, this would free up liquidity and possibly raise more funds by boosting the number of transactions. Reviewing and relaxing current restrictions on Green Belt land would equally contribute to relieving the housing crisis.
It is recommended that successive governments strongly consider investing in planning departments to recognise the planning barriers which are currently restricting many developers from building. A more effective planning system would provide quicker solutions and, in turn, encourage and enable more homes to be built.
Another possible solution would be to extend permitted development rights (PDR) to allow retail to residential conversions to increase. With an ever-growing number of retail stores closing, utilising this vacant space for residential purposes could go a long way in reducing the pressure on housing. In the UK, we have already seen some success from the converting of office buildings to residential accommodation.
Going forward, the government needs to focus on improving the ease in which developers can build, and people can buy. With an ever-increasing population, governments need to make the sector a priority and ensure supply is increased to put an end to the housing crisis.
This article first appeared in Property Week in August 2019.