LONDON (Reuters) - British Prime Minister Rishi Sunak will commit to a promise to build 1 million homes by the next national election, tackling a lack of housing stock that has alienated some younger voters who are often forced to pay high rents and are unable to buy.
Before an election expected next year, Sunak's governing Conservatives have witnessed a collapse of support among younger voters, who are frustrated at being priced out of owning their own homes and are struggling with high childcare costs. Housing has long been a contentious area for the Conservatives, who are divided between some lawmakers in rural areas who do not want to see an increase in building and want to protect greenbelt protected land, and between those in more urban regions, who want to see more homes built quickly.
Housing minister Michael Gove will set out further measures to unblock the planning system and build homes in the "right places" where there is local consent to reach the 1 million target that was set out at the 2019 election.
Sunak said "his government would concentrate on building in inner-city areas where demand was highest, including a new urban quarter in Cambridge to boost its role as a science hub. Today I can confirm that we will meet our manifesto commitment to build 1 million homes over this parliament. That's a beautiful new home for a million individual families in every corner of our country, using a term that refers to the time between the 2019 election and the next vote. We won't do that by concreting over the countryside - our plan is to build the right homes where there is the most need and where there is local support, in the heart of Britain’s great cities," he said in a statement."
The housing plan is the latest attempt by Sunak to reduce the opposition Labour Party's large poll lead after an unexpected victory in a so-called by-election just outside central London.
In June, British house building at the sharpest pace in more than 14 years apart from two months early in the COVID-19 pandemic, as higher borrowing costs dampened demand and weighed on the broader construction sector, a survey said this month.Earlier this month, a parliamentary committee said the government was on track to deliver 1 million new homes, but was not forecast to deliver another promise to build 300,000 net new homes per year by the mid-2020s, largely because of uncertainty over planning policy reform.
Government to focus housebuilding away from rural areas
New homes will predominantly be built in cities, the Rishi Sunak has announced, as he vowed not to “concrete over the countryside”.
The Prime Minister said that "the Government will hit its target of one million homes between 2019 and the end of next year. The plans will look to prioritise the building of housing in cities, rather than in rural areas which it claimed would be an uncontrolled sprawl concreting over the countryside. We need to keep going because we want more people to realise the dream of owning their own home. We won’t do that by concreting over the countryside – our plan is to build the right homes where there is the most need and where there is local support, in the heart of Britain’s great cities. Our reforms will help make that a reality by regenerating disused brownfield land, streamlining the planning process and helping homeowners to renovate and extend their houses outwards and upwards.”
It comes after the Prime Minister ditched mandatory housing targets in order to see off a rebellion of Tory MPs.
Parliament’s cross-party Levelling Up Committee found that the Government was not on target to deliver 300,000 new homes a year by the mid-2020s, with Clive Betts, the committee’s chairman, warning that the scrapping of targets was “already having a damaging impact on efforts to increase the building of new homes”.
Mr Gove is due to announce plans to cut red tape around making new homes by converting shops and takeaways, as well as making it easier to add extensions and lofts to existing buildings. Inspired by the regeneration created in east London by the Docklands Development Corporation in the 1980s, Mr Gove said his plans are to kick-start a “21st century renaissance for our great cities”.
The decision to focus on new housing in cities comes after warnings earlier this month of the shortage of affordable housing in rural areas. Analysis by the National Housing Federation found that between 2019 and 2022 the social housing waiting lists for rural areas grew by almost a third (31%), compared to only 3% in urban areas.
Lisa Nandy, Labour’s shadow housing secretary, said “it takes some serious brass neck for the Tories to make yet more promises when the housing crisis has gone from bad to worse on their watch, and when housebuilding is on course to hit its lowest rate since the Second World War because Rishi Sunak rolled over to his own MPs. We don’t need more reviews, press releases or empty promises, we need bold action to get Britain building.”
Ms Nandy has already announced plans to make it easier to build on unsightly parts of the greenbelt under a future Labour government, and a pledge to restore the 300,000 homes target. The Local Government Association (LGA) has flagged concerns about the prospect of loosening the rules around permitted development rights, arguing it can lead to substandard housing.
Councillor Shaun Davies, chairman of the LGA, said: “Further expanding permitted development rights risks creating poor quality residential environments that negatively impact people’s health and wellbeing, as well as a lack of affordable housing or suitable infrastructure."
Michael Gove tells Sadiq Khan: I’ll intervene if City Hall plan fails to deliver enough homes
Housing Secretary Michael Gove took a dramatic step on Monday last week to intervene in Sadiq Khan’s London Plan to force through a new homes boom. Mr Gove announced an “intention” to work with City Hall on a joint taskforce to boost the delivery of housing in the capital. But he told the Mayor that he was reserving the right to use powers at his disposal to instruct changes to the London Plan where it is seen to be “choking housing supply”.
The Government announced plans to boost house-building focused on three cities, London, Cambridge and Leeds, having watered down its targets in the face of opposition from Tory MPs.
In the capital, it was seeking to unleash a “housebuilding boom”.
The housing department said this included more support to deliver up to 65,000 homes in a new cross-borough East London Development Project, including Thamesmead Waterfront and Beckton Riverside, with up to 27,000 homes, two new town centres and better east to west transport connections. It said £1 billion was being “released” to City Hall to boost affordable housing and estate regeneration.
Ministers emphasised that the London Plan envisaged building 52,000 new homes a year, after only 30,000 were delivered in 2021/22, a Covid-hit year.
They added that the average house price in London was £525,000, compared with £275,000 for England, and the “affordability ratio” for the capital 12.5, against a national figure of 8.3.
Mr Gove’s intervention sparked an angry response from City Hall. A source close to the Mayor said “utter nonsense from Michael Gove and extraordinary hypocrisy from the Government who have relied almost entirely on London’s housing success in their national targets and are using Sadiq’s success as cover for their national failings. London exceeded the affordable home building targets the Government themselves set — building more homes of any kind than we’ve seen since the 1930s and starting a golden era of council homes building, with the most started since the 1970s. Sadiq is building a fairer, better and greener London for everyone.”
City Hall sources also said the £1 billion announced was not new money and that £6 million had yet to be confirmed for the extension of the DLR development work. The Mayor did hit the target he agreed with the Government of starting 116,000 homes between 2016 and April this year, but only by including more than 7,000 started when Boris Johnson was mayor.
The key problem in London is not the number of affordable homes being started — but the number being completed. It typically takes two years from start to completion and although 25,658 were started in London in 2022/23, only 13,954 were finished.
Meanwhile, Tory MP for South Cambridgeshire Anthony Browne vowed to “do everything” to stop the Government’s “nonsense plans to impose mass housebuilding on Cambridge”.
Mr Gove announced plans to slash red tape to allow more conversions of shops and takeaways into homes. A review into the extension of permitted development rights is expected to make it simpler to extend homes and convert lofts. But the Local Government Association said loosening rules around permitted development rights could lead to substandard housing.
Lisa Nandy, Labour’s shadow housing secretary, said: “It takes some serious brass neck for the Tories to make yet more promises when the housing crisis has gone from bad to worse on their watch, and when housebuilding is on course to hit its lowest rate since the Second World War because Rishi Sunak rolled over to his own MPs.”
SPEED UP
Changes to the planning system “will speed up new developments” and clear backlogs.
A new fund of £24 million to scale up local planning capacity, and an extra £13.5 million to set up a new “super-squad” of experts to support large scale development projects. Developers’ fees are to be increased to ensure all planning departments are better resourced. Gove also outlined plans to make Barrow ‘a new powerhouse of the North’, with thousands of new homes.
INDUSTRY REACTION
Charles Jordan, Head of New Homes, Winkworth
Charles Jordan, head of new homes at Winkworth, says “we still need more homes to be delivered but it’s a step in the right direction. The increased housing availability may help make housing more affordable and accessible to a broader section of the population. Changes to the planning system like the £24m planning skills delivery fund is also good news. A predictable and efficient planning system improves business confidence which the UK needs right now.”
Oli Sherlock, director of insurance, Goodlord, says “if we want to ease the pressure on the rental sector, we desperately need more homes to be built. However, we need targets and pledges to translate into bricks and mortar. We’ve neglected our housing market for far too long – now is the time for pragmatic action, not more talk.”
Relaxing planning rules – examining Michael Gove's latest proposal
Brokers react to the housing secretary's latest plan. The Secretary of State for Levelling Up, Housing and Communities, Michael Gove, has announced his intention to relax planning rules in England in an attempt to build more homes. This would be achieved by making it easier for developers to convert vacant retail premises and betting shops into houses and flats.
Mortgage Introducer sought to identify property experts’ views on the proposals.
John Choong, equity research analyst at Investing Reviews, said "Gove’s proposal reeks of political desperation, as the Conservative government attempts to claw its way back in the polls. It is more likely than not that the plan is yet another drop in the bucket of empty promises given Michael Gove’s anti-development actions as of late."
Choong added that "the housing secretary vetoed Marks and Spencer’s proposal to revamp its flagship Oxford Street store in an attempt to reinvigorate the dying high street in London. The government is not making housebuilding any easier for developers, either; new rules that are set to take effect in 2025 require housebuilders to install better insulation, alongside technology such as solar panels, all while having to pay higher taxes on profits."
These moves, Choong added, are only going to further disincentivise housebuilders from building more homes; as such, he believes Gove’s comments seem more like political PR than genuine action.
Laura Bairstow, founder at The Mortgage Masters, said "while in theory this may sound like a good idea, many lenders do not like to lend on properties that are above or close to business premises. Lenders consider borrowers on this type of property higher risk, resulting in fewer options when it comes to deals and products available."
Potential buyers, Bairstow said, may therefore struggle to get a mortgage, or end up paying higher interest rates for the privilege.
Scott Taylor-Barr, financial adviser at Barnsdale Financial Management, said "making the conversion of currently unused buildings easier is a win-win. It creates more housing for people and regenerates property that otherwise would sit vacant, and boarded-up shops are never going to be a good thing for an area."
On the other side of the coin though, Taylor-Barr said "there is a limit – no-one wants to see all urban centres just become a glut of new housing with no shops, bars, or cafes."
Graham Cox, founder at Self Employed Mortgage Hub, said "making it easier for developers to convert empty retail premises and betting shops into housing is a welcome development. The high street has changed irrevocably over the past decade, and there are only so many coffee shops and estate agents a town can bear. Allowing more mixed-use development, could help fill the gap when outlets stand empty. That said, it is only part of the solution; we need more house building on both the green and brown belts.”
Paul Welch, founder and chief executive at Large Mortgage Loans, said "everyone should have the chance to live in a home that they can call their own, whether that is through 100% ownership, part ownership or even rental. Converting empty city centre office space is a great idea in theory, but we must ensure these properties are affordable. This could be achieved, through partial funding by local authorities, providing more social or subsidised housing to help those who cannot afford to buy a home. This would not only give housebuilders a boost and provide local authorities with an income from rental and a return on their investment, but we could potentially see greater footfall into city centres which will help retailers, so the benefits could be widespread. However, first things first, the government needs to bring inflation under control otherwise we will continue to have a situation whereby people struggle to afford a mortgage, and so will not be able to buy these converted properties, even if they wanted and desperately needed to."