The government has long pledged its commitment to tackling the UK’s housing shortage, which began not because of a blip lasting one year, but because not enough homes were built over many decades. This commitment goes back to 2015 when the government vowed to deliver a million new homes by 2020, a promise the then Prime Minister Theresa May restated at the general election two years later.
In 2019, she described the housing crisis and solving it as ‘the single biggest domestic policy challenge of our generation’ and pledged to ‘continue progress towards our target of 300,000 homes a year by the mid-2020s’. As recently as last month, Michael Gove the Secretary of State for Levelling Up, Housing and Communities recommitted to this Tory manifesto pledge despite citing challenges and said the government remains committed to this target. Meanwhile, there are also calls to replicate the commitment in Scotland – which would equate to around 29,100 new builds completed per year.
Yet, despite the government’s efforts to boost construction, new-built housing completions in England between 2010 and 2020 was approximately 130,000 per year – well below the 147,000 of the 2000s or 150,000 of the 1990s and half of the level seen in the 1960s and 1970s. The current credit tightness we witness in the market will likely hurt new housing developments further and curb supply.
So, why has the government failed SME housebuilders and why hasn’t it been able to deliver on its pledge of boosting UK housing supply?
I believe the answer to this question can be traced to Albert Einstein's famous line: “Insanity is doing the same thing over and over and expecting different results.”
Indeed, the government’s housing policy has revolved around doing the same thing over and over again and expecting different results. The government must now break this cycle of systemic failure. A new government always brings in high hopes. Therefore, if this government is truly serious about achieving its target of 300,000 homes a year, here are three things it immediately needs to do.
First, planning reform is urgently needed. The planning system and the snail's pace speed at which it operates has historically been one of the biggest barriers in the delivery of UK housing and is why so many mid-size housebuilders have closed or been absorbed by some of the larger players in recent decades. In 1988, small builders were building 40% of new-built homes compared with just over 12% today.
Planning committees and their structure need overhauling to save developments from being caught in months, if not years, of process treacle and useless frustrating red tape. In other words, this government needs to make it easier to obtain planning consent. This will, in turn, encourage rapid development of new housing in places where they are most urgently needed.
Second, specialist financial providers need to be brought into the fold to help tackle the housing crisis. Lack of funding, especially among SME property developers and small construction companies, is a key reason for the disappearance of so many mid-size housebuilders over the past two decades. And one concrete and effective way for the government to support housebuilding is by working with specialist development finance lenders to channel funding to SME developers.
These specialist lenders were able to show their key role by keeping credit flowing when the pandemic led to the 'lockdown on lending' at traditional lenders who were busy administering the Coronavirus Business Interruption Loan Scheme (CBILS). Due to their nimble size, flexibility and efficiency, specialist development finance lenders have demonstrated that they can and must be part of the solution to the UK housing crisis.
Third, the private rental market – the “wild west’ of Britain’s housing stock” - needs to be professionalised and the rise of build-to-rent developments is one right step in this direction.
In summary, the current crisis is a sad reflection that the government has consistently failed SME housebuilders. We must now ensure that the current credit tightness does not wield the final blow into a sector that is the lifeline of our economy.
