Allow local authorities more freedom - let our LAs build!

“The Government must build 300,000 homes each year in England to help solve the housing crisis, an increase of 50pc from its current target”, a committee of Lords has advised. Well the number needed keeps getting bigger because year on year there is a shortage of homes delivered – basically housing is still a key industry to the UK economy. The committee also recognises that it is the public sector not private sector that will deliver the increase, though I would argue it is also smaller developers doing <25 home developments.

Two key points to me are:

1. Current government policy includes the changes to stamp duty in April 2016 and also the cuts to social rent. Both of these have had an adverse effect – an effectively the latter hits the poorest hard.
2. The current restrictions on local authorities in relation to how much they can borrow is odd! Why can a local authority borrow money to build a park (which brings in no income) rather than a house which can be sold and reinvested.

Building homes is a risky business and it is understandable that house builders want to manage that risk by building homes in a safe environment to ensure sales which as a result means certain house builders hold large volumes of land directly or under option. There has been talk of councils imposing fines on house builders who do not develop, though this potential can have negative implications, i.e. land is simply only bought at the point it is needed – that could completely change how the model works, and who knows what that would result in, but when over 50% of homes are built by 8 house builders it is clear we have headed towards an oligopoly.

The Government set a target of one million new homes built by the end of this Parliament, meaning 200,000 homes per year. It has been ten years since that many houses were built in one year; in 2015, 142,890 houses were completed. The Lords’ target of 300,000 is higher even than the consensus of what experts deemed would be necessary.

So to solve the problem of not only building houses but also building houses for those that need them you remove the restrictions on local authorities, allow them to create “housing arms” which can either work with the private sector or simply work alone to bring forward regeneration of land within their city. This has the benefits of rejuvenating stale parts of the city. It can help improve authorities invest in apprenticeships linking to local schools to train people, thus helping towards skill shortages and to top it all off a local authority will be far more inclined to build affordable social housing.

Feel free to contact me 0113 288 2276 or lee.a.wilkinson@uk.pwc.com if you wish to discuss this blog or anything relevant to property and construction.

Enjoy your weekend

Lee