Britain’s new build drought presents a major obstacle for the prime minister’s pledge to first-time buyers, writes Andy Morrison, director of UK Property Development
Andy Burnham arrived in Downing Street (North?) on a wave of what I’m calling Labour desperaspiration. Ever since the party’s hesitant lurch left under the guardianship of Jeremy Corbyn, it has been urgently trying to steady the ship and regain the trust of Middle England who, with Corbyn at the helm, saw Labour as socialist at best and, at worst, a dangerous, destructive force against basic national honour.
It matters not whether you or I agree with this. The fact of the matter is that it caused Keir Starmer’s phoenix-like rise to power to lean heavily on the centre-right politics of the party’s late-90s heyday. The price paid for this abandonment of leftist ideology was swift and unforgiving: too right for many Labour supporters and backbenchers, too Labour for the Tories, and too noncommittal for advocates of Reform UK’s “radical” nationalism. So long Starmer.
Burnham is perceived as being on the left of the Labour Party, but not the kind of “loony left” that so many Brits have lived in fear of since the Bolshevik Revolution. His mandate, were he to have a mandate, is one of sensible yet compassionate politics: improve the daily lives of the people and they, in turn, will help improve the state of the nation.
The new build shortfall
One of his first major announcements in this effort to improve lives is Your First Home, a reanimation of the Help to Buy Equity Loan Scheme with a few small but potentially transformative adjustments.
Your First Home is designed to make home ownership more accessible than ever by slashing the required deposit down to 2.5% and supporting first-time buyers with a 20% government-backed loan (interest-free for a period). Some of my colleagues recently calculated that the scheme has the potential to help FTBs save £21,500 over their first five years on the market.
This is all very interesting but, as with Help to Buy, our First Home is only going to be offered to those who are buying new build homes. Here lies the problem.
The PM wants to get more renters into ownership. The expectation, therefore, must be that Your First Home will create a surge in the number of first-time buyers entering the market, all of whom will be looking for qualifying new build homes to settle down in.
However, there is no clear evidence for me to have the slightest bit of confidence that this increased demand will be met with an equal boost in supply. Without increased new build delivery, all of these Your First Home buyers are going to have their initial excitement punished by the fact that they have no homes available to them, and certainly not if those buyers are located anywhere other than the major cities or commuter belt locales.
Why is it so important to boost supply? Because as it stands, new builds account for a tiny slice of the housing market. Just 8.1% of available listings, in fact. As of early October, there were an estimated 523,000 homes on the market. Barely 42,000 of them were new builds. If Your First Home creates a surge in new build demand, this kind of representation simply will not do.
Every government since time immemorial has recognised the need to increase new build delivery. Or rather, they have all paid lip service to the idea of doing so, without ever really feeling the need to honour that pledge.
The current Labour government, under Keir Starmer, pledged to deliver 1.5m homes in its first term. So far, it’s estimated 437,900 net additional homes have been delivered with 44% of its term elapsed. Findings from elsewhere indicate that the government needs to significantly increase its construction rates if it is to catch up to its manifesto promise.
The point being, what’s the use in creating a buying scheme that dictates you must buy a new build when you know full well that there aren’t even enough new builds to satisfy current needs, let alone a windfall of additional demand?
Thinking differently about housebuilding
Is it possible to increase supply? Maybe. But only if the government starts talking less about building more homes and starts to think differently about what actually causes a home to get built.
So far, the main weapon in this battle has been planning permission reform. This is not enough.
If Burnham’s ambition is to move more people from renting into ownership, his government needs to start treating housing delivery as a supply chain problem rather than a planning target.
A home is not delivered when a council allocates a site or even when a developer receives planning permission.
It is delivered when the land is viable, the infrastructure is in place, finance is available and a developer actually puts a spade in the ground.
Labour therefore needs to concentrate on unlocking those final stages: accelerating planning decisions, bringing forward the roads, schools, utilities and other infrastructure that make large sites viable, making it easier to assemble land, and using public money more strategically to get stalled or marginal developments moving.
That may also require a fundamental rethink of how the 1.5m target is pursued. Rather than relying overwhelmingly on the major housebuilders to increase output, the government could use Homes England, local authorities and housing associations to create a more diverse and resilient housebuilding sector, while, and this part is essential, making it easier for smaller developers to compete.
The government needs to measure success not by how many homes have been granted permission but by how many are actually being built and completed.
If Your First Home is going to create thousands more aspiring buyers, the government must make sure there are thousands more homes waiting for them. Otherwise, it risks doing exactly the opposite of what it intends: stimulating demand in a market where supply is already desperately constrained, pushing up competition for the few new builds available and leaving would-be homeowners wondering why the government helped them afford a home that does not exist.
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