Housing top of National Agenda after 30 years of neglect
With the average house price now almost eight times that of the average person’s income, the UK’s house price inflation rate is among the highest in the world. Despite decades of price inflation and a growing population, the number of houses being built in the UK has steadily fallen over the last 30 years, leading to a significant undersupply of homes and an imbalance between supply and demand in the UK housing market.
As a result, property prices have now reached levels that are simply unaffordable for many of those looking to get on the housing ladder, while those renting, have seen their rents rise to levels which renders it virtually impossible to save the money needed for a deposit on a home, whilst the quality of the property they rent remains sub standard.
With the UK population set to increase by 10 million over the next 25 years, the need for homes will only grow. Recognising the need to urgently fix the “broken housing market” the government has now placed housing at the top of the national agenda and set itself a target of building one million homes by 2020, the strategy for which was released on February 7th in the much anticipated housing white paper.
The paper focusses on the strategy for delivering all different kinds of tenure – for outright ownership, shared ownership and for renting, placing less emphasis on increasing home ownership and more on simply delivering enough homes to tackle the housing deficit.
Reforming the rental sector
This lack of affordable housing has resulted in a significant decline in home ownership and a rise in the number households renting from private landlords, while a generational shift in attitudes towards home ownership has seen many young people actively choose to rent, preferring the freedom a flexibility it offers compared to committing to a mortgage.
Chris Taylor, Chief Executive of Hermes Investment Management’s real estate arm, commented: “There are profound demographic and lifestyle changes apparent in the UK, young people want to live, work and play in cities, and the fact of the matter is that housing is not accessible or affordable to them.”
The government’s white paper reveals the number of tenants renting in the private rented sector (PRS) has doubled over the past decade to 4.3 million. As a result, a large part of the government’s strategy for solving the housing crisis includes major reforms to the UK’s rental sector including increasing the construction of purpose-built rental properties by encouraging investment in build-to-rent.
John Goodall, CEO of peer-to-peer lender Landbay, commented: “Simply building more homes is not enough, but building more homes specifically designed to rent rather than buy should go some way to increasing the number of people able to get a foot on the housing ladder down the line,”
Build-to-rent – the solution to the housing crisis?
Build-to-rent schemes are redefining the concept of renting, offering a potential solution to the UK’s housing supply shortage and helping to steady spiraling rental costs in the process. A viable alternative to home ownership, build-to-rent properties are designed specifically with the occupant in mind, offering the tenant a high-quality living environment, with the option for long-term tenancy and the investor a properly managed property.
Expert opinions are of the consensus that the build-to-rent model is capable of delivering homes at a considerably faster rate than homes for sale and believe the scheme offers an important opportunity to attract investment into new housing, delivering high-quality developments in appropriate locations where people want to live, work and build communities.
The mobility of employment means more people want and need to rent properly designed, built and managed units in urban areas, build-to-rent offers this opportunity. With more purpose-built homes available to those looking to live in urban areas, overall supply of rental properties will be increased, in turn improving market competition and providing renters with more clarity and control over their rental rates.