Only a new-build revolution can address the housing crisis
A new-build revolution is needed to address the housing crisis, says Jamie Johnson, CEO of FJP Investment. So, what's the plan?
It almost goes without saying; but the housing crisis is one of the biggest problems facing the current government. Along with the outbreak of coronavirus, climate change, and reinvesting in public services – it will likely be a top priority for the Government in 2020.
This was seen most keenly in the Prime Minister’s promise to build a million new dwellings over the course of this Parliament. Whilst his ambition is commendable, major questions remain around how that target will be hit.
Many past governments have tried and failed to spark a housebuilding revolution in the UK. That’s why now is an opportune time to analyse the Conservative party’s current plan towards the property market and whether it is the right course of action to take.
Will the National Infrastructure Strategy achieve its aims?
The National Infrastructure Strategy (NIS) might sound like jargon to those not in the property space, but it has the potential to radically transform the UK construction industry. With the former Chancellor Sajid Javid having promised to spend £100 billion of government funds as part of the strategy, it could also help finally create the environment for a British housebuilding revolution.
For example, greater investment in areas outside of London help make them more appealing to property investors and new developers. The HS2 and HS3 rail links looks set to make regional cities and towns better connected to the country’s major cities. In turn, this will lead to an increase in the demand for properties in these places.
Furthermore, regional house price growth outside of London has been encouraging over recent years. According to analysis from Zoopla, the average house price in the Midlands grew by more than £35 per day — an impressive figure. With greater investment from the NIS, these places could be spurred on even further, creating the kind of healthy market growth crucial for mass housebuilding.
However, the NIS does have some potential major drawbacks worth considering. Whilst this Government has committed some funds (£250 million) for the construction of 20,000 homes, this is still a drop in the ocean relative to its overall aim. More broadly, the housing crisis may require its own joined-up strategy, equivalent to the scale of the NIS, if it is to be successfully solved. One could say having housing policy integrated into the NIS could is a reflection of waning government focus. Only time will tell.
What are the Conservatives proposing?
More generally, it is important to note that the Conservative party has suggested some important policies that could help spur on the property market. In the lead-up to the 2019 General Election campaign, the party proposed several policies in a bid to help the sector. A survey of property investors by FJP Investment found that a majority (68%) supported, for example, the Conservatives' plans to involve communities in the planning of new developments. This would likely help create homes that are more locally integrated and so appealing to the market, helping developers create new builds of the highest quality possible.
Similarly, a large proportion (70%) expressed positivity around the Conservatives' plan for an additional stamp duty tax on foreign buyers. Whilst Brexit might make it unnecessary, this plan could help diminish external demand and bring down domestic prices. In turn, this might increase market liquidity and augment the growth of the property sector.
Looking to the future
Of course, there are a lot of hypotheticals when considering how the Government should act in the future. The housing crisis is an issue of such stubbornness and magnitude that determining a single plan of action will be difficult in any case. However, investment and reform will be central to any approach, which is why the NIS is both encouraging and concerning. Whilst it indicates the right degree of commitment and ambition, its focus on infrastructure may drag the emphasis away from housebuilding, making a new-build revolution more difficult to achieve.