In a few hours time we’ll have a new Prime Minister and to say there is going to be a lot in his or her in-tray to tackle would be an understatement – and that’s just the housing market, let alone everything else that is going to require swift consideration.
Instinctively, and with good reason, when you answer the question of what the housing market needs most, you tend to say “more supply”. Although, perhaps somewhat counter-intuitively, that may be exactly what we’re going to get, at least in terms of secondhand properties coming to market.
We’re all acutely aware that demand has outstripped supply by some distance both before, and since, the pandemic began. However, what we might be moving towards now is a more balanced situation, particularly as the impact of rising mortgage rates, increased inflation and an accompanying slowdown in house price inflation begins to bite.
Which is not to argue that the next PM needs to shy away from improving the new-build supply output in any way, shape or form. Far from it.
What has been slightly troubling about the recent debates between the PM candidates Liz Truss and Rishi Sunak is that it appears both are moving away from a target-driven housing supply focus. This Conservative government was elected on a manifesto commitment to build 300,000 new homes every year from the mid-2020s, and as that target has got further out of reach, it appears both Truss and Sunak are about to jettison it completely.
You might well argue about the point of such targets given that previous iterations have not been hit. They have been called arbitrary, and somewhat oddly, “Stalinist” by Truss, but my view is that they are necessary even if there’s just a degree of keeping the government ‘honest’ in trying to meet them.
Of course, we tend to cling to a 250k new-house requirement each year in this country – which hasn’t been met for a generation – and 300k might have been seen to be wildly optimistic, but I would rather the government aimed high when it came to house-building because that extra supply is undoubtedly required.
Even with a degree of impact to demand, I still see supply as the prevailing issue that needs to be addressed. I also don’t mind something of a new approach that perhaps does tackle perceived local barriers which are nothing more than NIMBY-ism. Of course, there needs to be the necessary logistics and local services available as well for larger-scale developments, but if the case can be made, then the houses should be built.
Interest rates are obviously a key factor for our sector, and recent increases may well set people on edge as the Bank of England attempts to stem inflation. I am not of the view that taking away the BoE’s independence in such matters would be a good path, even if there is a perception that it delayed for too long in taking action. Politicians ‘taking back control’ of interest rates does not appear to me to be a very good idea at all.
Support first-time buyers
Clearly, rising rates impact on certain borrower groups more than others, perhaps not least those potential first-timers who may see their ability to afford mortgages pushed further out of reach. We have had the recent decision to remove the stress rate requirement for lenders, and this might have some impact in allowing more first-time buyers to secure the mortgages they need. However, this has to be coupled with responsible lending and I don’t envisage lenders straying far, if at all, from the previous approach.
However, over the last decade, Conservative governments have continually chosen to support first-time buyers and it seems likely this next version will do the same. Again, the last manifesto had a commitment to increase the number of first-time buyers in every region of the country by the next election. We could therefore see more government money pushed in this direction, with Help-to-Buy-esque schemes.
Finally, I would like the next PM to acknowledge that we do not just require homes for owner-occupation. There is a severe shortage of private rental sector (PRS) homes for renters, fuelled by a range of policies which seem designed to remove PRS landlords and their properties from the sector.
If people can’t buy, they still need places to live, and without the PRS, then our housing gap would be a chasm.
Perhaps it is wishful thinking to believe the government will introduce or change existing policies in order to make it easier for landlords to bring more supply to market. So, my hope would be that we don’t see anything more which makes it even harder to run a portfolio. A reduction in the number of landlords would be a very unwelcome problem.
Rob Clifford is Chief Executive of Stonebridge