The Conservative manifesto promised to up supply – now there are calls for it to deliver.
The Government must address the shortfall in new homes building, according to Hiten Ganatra (pictured), managing director of Visionary Finance.
“Firstly, we still have not addressed the shortfall in new homes building with net new dwellings running at just over 200,000, as forecasts estimate 345,000 new homes per year are needed to meet the backlog and future demand,” he said.
What was promised?
In the Conservative Party manifesto in 2019, it committed to increasing housing supply in England, alongside all the other main political parties. The Conservative manifesto pledged to “continue to increase the number of homes being built” and referred to a need to rebalance the housing market towards more homeownership.
It said progress towards a target of 300,000 homes per year by the mid-2020s would continue, which would “see us build at least a million more homes, of all tenures, over the next Parliament.”
However, new housing supply is currently lower than the government’s ambition of 300,000 new homes per year, with 216,000 new homes supplied in 2020/21. This is lower than the 243,000 new homes supplied in the previous year, in part because of disruption to housebuilding caused by COVID-19 in early 2020.
What can be done to fix the problem?
Ganatra went on to say that he has comprised three key elements for the government to review, which he believes will improve the number of new homes built in England.
He pointed to the availability of skilled tradesmen as a factor to why the level of housing stock is below its targets.
“While there are many construction-related apprenticeship and training programmes available, the uptake of these courses is dwindling, with the Federation of Master Builders reporting apprentice numbers in the construction sector falling,” he said.
The Construction Industry Training Board has said that the sector needs to recruit and train 31,600 workers every year to keep up with demand. However, recruitment has been difficult since 2020 due to the impact of the pandemic, which has affected the economy and in turn, employment.
As we come out of the worst of the pandemic, employment levels have improved, with Office for National Statistics data showing that the UK unemployment rate was estimated at 3.9%, 0.2 percentage points lower than the previous three-month period, which is nearing pre-coronavirus pandemic levels.
“The planned root and branch reforms of the current planning system must be implemented,” Ganatra added.
He explained that absolute control of the planning process needs to be taken away from local authorities and replaced by something like a regional housing delivery taskforce.
“This taskforce would look to consider each major planning application based on pragmatic views with emotions and vested interests withdrawn,” he said.
In addition, Ganatra believes a framework to encourage smaller developers and make funding more accessible and cost effective should be implemented. Borrowing rates for small developers to fund projects are significantly more expensive than for larger house builders.
Ganatra added that another consideration for smaller developers is the capital they are required to inject which could be as much as 40% of the land cost and 40% of development cost.
“Finally, I propose we scrap Stamp Duty Land Tax entirely and look to replace this with some form of residential property sales tax, where the seller pays a percentage from the equity they have built,” he said.
During the height of the pandemic, the government chose to offer a stamp duty tax holiday, which meant that no tax was required on all properties worth £500,000 or below. The tax holidays on stamp duty or its equivalent taxes, were introduced by ministers to stimulate the housing market as the country emerged from the first national COVID lockdown last summer.
Ganatra noted that critics of his idea to remove stamp duty permanently would suggest that the proposed residential property sales tax would be still, indirectly, passed on to the buyers.
“However, with many buyers reliant on a mortgage to support the purchase, the valuation of the property would need to remain affordable,” he concluded.