A new strategy to tackle the housing shortage, boost the economy and give people the opportunity to get on the housing ladder was announced today by the Prime Minister.
The Prime Minister and Deputy Prime Minister said the Government has inherited a broken housing market and a devastating collapse in construction from the era of top down targets, but new plans will give the housing market a shot in the arm by boosting supply, easing financial pressures and helping with demand, report the Department for Communities and Local Government.
The action we take will drive up the level of housebuilding, ensure we are helping new home owners and boost consumer confidence.
The Strategy will break the current cycle in which lenders won’t lend, builders can’t build and buyers can’t buy.
We’ll be making it easier for people to secure mortgages on new homes, help people get on the property ladder, address unfairness in social housing and ensure homes that have been left empty for years are lived in once again.
Help for home buyers
At the heart of the strategy is a new build indemnity scheme that will give a helping hand for up to 100,000 prospective buyers who are currently frozen out of the housing market because of the need for large deposits.
Under the proposals, homebuyers will be able to secure loans on newly built homes - the bedrock of the first time buyer market - with only a five per cent deposit.
The Government and housebuilders will help provide security for the loan, so if the house is then sold for less than the outstanding mortgage total the lender will be able to recover its loss.
Through the scheme lenders will be encouraged to offer mortgages with smaller deposits, increasing demand for new homes and giving a welcome boost to the housing market.
The Government will also consult shortly on proposals to increase discounts under the Right to Buy, giving social tenants the opportunity to buy the homes they live in.
The discount will be improved dramatically and will be up to half the value of the home, making home ownership ever more achievable.
For the first time, the receipts from additional Right to Buy sales will be used to support the funding of new affordable homes for rent on a ‘one for one’ basis, which is expected to deliver up to 100,000 new homes and support 200,000 jobs.
Help for housebuilders
Assistance for people buying homes will be matched by support for the people who build them, from the largest housebuilder to people who want to build their own homes.
Affordable housing providers are in line to share almost £1.8bn cash to develop new affordable homes.
The first £1bn worth of contracts under the Affordable Homes Programme have just been confirmed, putting the Government on track to deliver up to 170,000 new affordable homes across the country over the next four years.
The Government will give more support for local areas that want to deliver new, larger-scale developments that meet the needs of their growing communities.
A new prospectus will be published shortly inviting councils and communities to identify opportunities for locally planned large scale development, which will take advantage of streamlined planning processes, giving communities a stronger say and developers greater certainty.
The new plots could vary in size, from a small expansion of a few hundred homes through to a new market town with up to 10,000 homes.
Viable schemes that are sustainable and have strong local support will be given financial assistance to get the work going, and will be prioritised for future infrastructure spending.
Where there are existing building sites that have stalled, a £400m Get Britain Building funding pot will enable housebuilders to restart construction, helping to deliver up to 16,000 new homes on sites that already have planning permission, but have been shut down because of economic conditions.
The new support on offer will also benefit self builders, an industry often assumed to be out of reach for some, but one that is increasingly popular and already worth £3.6 billion for the national economy.
We are announcing £30 million additional funding to support provision of short term project finance on a repayable basis.
Councils will receive support to work with local people and bring forward plans for larger custom-built housing projects, similar to the successful project in Almere in the Netherlands.
All these measures will be supported through the New Homes Bonus, which will ensure that those areas which are growing have the resources to meet the needs of their new residents and existing communities.
Improving fairness in social housing
Efforts to boost the supply of new homes and help homebuyers will be matched by improving fairness for those living in social homes.
Measures in the strategy will support the radical programme of reform to the system for social housing that is already underway.
The Government will consult on ‘Pay to Stay’ proposals. This will mean that those social tenants on high salaries, such as household incomes of over £100,000 a year, will pay up to market rents if they want to continue living in taxpayer-subsidised homes.
Councils will be given new powers to reject applications for social housing from people who own a perfectly acceptable home of their own.
And there will be stronger measures to help tackle the outrage of 50,000 unlawfully-occupied social homes - with a more detailed consultation to be published later this year.
The overly bureaucratic and complex model of council housing finance will be scrapped too so councils can manage their social housing stock more effectively.
Instead of the revenue generated from social housing being handed over to central Government and redistributed, councils will be able to keep their own receipts, giving them freedom to maintain their housing stock with more efficiency and transparency, in a way that meets local needs.
Support for the private rented sector
The Strategy will also support greater investment in the private rented sector, a sector which accounts for a third of all households.
Large scale investment will be driven through changes to the tax rules affecting bulk purchases of buy-to-let homes, as well as through measures to encourage the growth of Real Estate Investment Trusts - the globally recognised model for real estate investment that provides low cost access to capital.
An independent review will also consider whether there are barriers to greater large-scale investment in rented housing.
Action on empty homes
The Prime Minister and Deputy Prime Minister said that the fact that for years so little has been done to bring the nation’s growing number of empty homes back into use is a “national scandal”.
Tackling the 700,000 empty homes across the country is a top priority in the strategy, and a key feature in the drive to increase the provision of affordable housing.
Housing Associations and councils will be able to apply for part of £100m of Government funding to bring empty homes that blight neighbourhoods back into use.
The money will be used for innovative housing schemes that will ensure empty properties that ruin neighbourhoods are lived in once again, communities are regenerated and at the same time more affordable housing is provided.
Government is also announcing £50 million of further funding to tackle some of the worst concentrations of empty homes.
The schemes will be backed by cash rewards through the New Homes Bonus for councils bringing empty homes back into use, and many schemes will also have wider benefits such as providing excellent training opportunities for local people.
The Government is also consulting on plans to allow councils local discretion to introduce a council tax premium on homes in their area that have been empty for more than two years, to provide a stronger incentive for empty homes owners to bring them back into use.
Supporting older people to live independently
The Strategy also focuses on the needs of older people and includes a deal to improve the quality and choice of housing available for older people, which aims to help them to stay independent for longer.
Nearly a third of all homes are occupied by the elderly, and nearly two thirds of the projected increase in the number of households over the next twenty years will be headed by someone aged 65 or over.
So a package of measures will help the elderly adapt their homes, or move into alternative housing, to meet their changing needs. As part of this package the Government will work to develop simple and attractive financial products that help older home owners safely release equity that they can then use to maintain or adapt their homes.
Other reforms set out in the strategy include:
- transferring housing and planning powers from central government to councils and local people, so that they can shape development in their areas
- replacing top down targets with powerful cash incentives through the New Homes Bonus, so instead of simply feeling the strain that new building projects place on existing services, communities have a reason to support new development
- supporting private sector growth by reducing regulation and other burdens on house-builders
- accelerating the release of public sector land with capacity to build up to 100,000 new homes by 2015, and support up to 200,000 construction and related jobs during development.
RICS spokesperson Michael Newey, said:
“RICS welcomes the Government’s Housing Strategy and hopes that the proposals can go some way to boosting the stagnant housing market. Given its central role in driving economic growth, it is right that housing is now at the top of the political agenda.
“Better access to mortgage finance is essential to bring forward the new homes needed to help more achieve their aspiration of home ownership, particularly first-time buyers. The New Build Indemnity Scheme is to be welcomed but care must be taken to ensure it does not distort the market or lenders affordability calculations.
“The focus on new build will not free up chains and may reduce demand for second hand property, putting those who wish to move but have little equity at a disadvantage.
“Whilst any attempt to stimulate supply and demand will help both consumers and developers, limiting funding to niche areas of the market in this way does not solve the wider need for adequate levels of funding in all parts of the market. Any new scheme must be clear and easy to understand for the consumer.
“Small to medium-sized developers will particularly welcome the Get Britain Building Investment Fund and the recognition of the key role housebuilders will play in driving much-needed economic growth.
“Further steps to free up public land for developers are encouraging but care must be taken that the land is in the right place with the right infrastructure. Projects must be properly analysed for viability otherwise developers run the risk of creating ‘white elephants’ that do not satisfy demand.
“Whilst a renewed focus bringing investment into the private rented sector is encouraging, an opportunity has been missed to begin delivering real consumer protection and professionalism right across this rapidly growing sector. RICS is keen to work with other industry bodies to develop these proposals.
“This is a good start from the Government but more detail is needed. RICS looks forward to continuing engagement with the Government and the sector to deliver a sustainable housing market that delivers aspirations across all sections of the market, benefiting UK PLC as a whole.”
Ian Fletcher, director of policy at the British Property Federation, said:
“The housing strategy is a welcome first step towards a coherent and long-term vision for house building in this country and it is good to see the government recognise the importance of encouraging investment in to the private rented sector, something that will be vital if we are going to see the necessary number of homes built to meet demand.
“We would urge the government to press on with this quickly. The strategy is welcome but it comes not a moment too soon with house building at historical lows and the general economy in dire need of support. In practice this means bringing forward sites for build-to-let by next April, at the latest, and conducting a swift independent review by somebody with intimate knowledge of the sector.
“Likewise, we would urge government to get its ideas on converting empty offices in to new homes by next spring.”
Paragon Group Chief Executive Nigel Terrington says:
“We welcome any measures that will help stimulate both the housing and mortgage markets. It is clear that the UK has a serious housing problem, with not enough homes being built and a lack of mortgage finance.
“Current housing completions simply aren’t sufficient to meet forecast household formations, so a commitment to build thousands of new homes is a positive start, whilst plans to support homebuyers through the mortgage indemnity scheme will stimulate the first time buyer market.
“It is crucial to the success of the mortgage market and the economy that we have a housing market in balance and with growth options across both the rental and owner-occupied sectors.
“It is pleasing that the Government has recognised the important role the private rented sector plays in providing a home to millions of renters and that Housing Minister Grant Shapps has acknowledged landlords already comply with a comprehensive set of regulations.
“With tenant demand at the highest level we have seen in modern times and likely to grow further, it is important that the private rented sector has a committed base of investor landlords to enable it to grow, and fostering a fiscal and regulatory environment that encourages that is vital.
“Institutional investment will only play a complementary role to the mainstay of the private rented sector, the private landlord, and so whilst there is a focus on attracting greater levels of institutional investment into the sector, policies must not favour institutions over individuals.”
Tracy Kellett, managing director of buying agents, BDI Home Finders, comments:
“The new build indemnity scheme ostensibly removes negative equity risk for buyers with small deposits. But how many people will genuinely benefit from the new build indemnity scheme?
“If the Government and house builders are taking on the risk, what will the criteria be for people applying for these loans?
“The real number of people enjoying the scheme is likely to be far lower than the headline number. The devil, as ever, is in the detail.
“We’ll have to wait and see whether the new build indemnity scheme is the panacea the market needs or just more PR fluff.
“We have seen so many fly-by-night home buying schemes in the past and their impact has almost always been negligible. Take-up, in many cases has been pathetic.
“The Government has become so focused on the first time buyer that it has forgotten the squeezed middle. Any housing strategy has to cascade upwards through the chain, not focus purely on the first link.
“There’s no point getting first gear working if the engine jams once you get into second. A huge number of second-time buyers are also up to their necks in negative equity. What’s the Government doing about that?
“Given the scale of the market crisis, it’s unlikely it can do anything at all. Ultimately, only the market can make the market better.”
Grenville Turner, Chief Executive of Countrywide, said:
“As the UK’s largest estate agency and property services Group, we welcome the fact that the Coalition has finally recognised the importance that the housing market plays in the regeneration of the UK economy and in particular job creation and has taken measures to support this.
“The measures announced today are a step in the right direction and address the key fundamental issues that have restricted the housing market in recent years– housing supply and the requirements of high level of deposits– have both been addressed. We wholly support the focus around raising the availability of new stock in both the sales and rental markets and the measures announced to assist first time buyers onto the property ladder.
“The government need to ensure that their promise of increasing house building is followed through and not restricted by planning red tape.
“Whilst the proposed new build indemnity scheme is a welcomed boost to homebuilders and prospective buyers, at a time where deposit affordability has remained a significant barrier to not only first time buyers, it is disappointing to see a lack of measures to assist the vast majority of homemovers.
“A stamp duty holiday for all homebuyers up to £250,000 by would have been a welcomed boost to the resale market and should still be considered.
“We also welcome the consideration of tax break measures for buy-to-let investors. As the UK’s leading lettings network, we have seen rental demand increase significantly, leading to a serious shortage of rental properties available to let.
“With an average of five tenants competing for each available rental property, any Government support to encourage investment in the buy-to-let sector will help to relieve the supply and demand imbalance.
“The proposed introduction of a council tax premium on homes that have been empty for more than two years is not before time. Empty homes have blighted towns and cities across the country and we are pleased that the government are now addressing this chronic issue which could reintroduce thousands of properties back into a habitable condition.
“We may be in the midst of a rental boom and some may argue that renting has become the new norm, however, we have seen that there is still a serious appetite for homeownership in the UK and we hope that the Government will continue to view the health of the housing market as a priority.”
Alan Ward, Chairman of the Residential Landlords Association said:
“The Government’s commitment to boosting the supply of private rented accommodation is good news for tenants for whom the sector is their best hope of meeting their housing needs.
“Increasing supply is the best way to ensure that rents are prevented from spiralling out of control, and we look forward to engaging with the Government’s proposed review of investment into the sector, building on the work undertaken by Professor Michael Ball of Reading University in his Report on the subject to be released tomorrow.
“The Government’s commitment to ensure regulation does not act as a barrier to new housing is also welcome. The RLA agrees that local authorities already have the powers needed to root out those landlords who bring the sector into disrepute, and we support the greater use of accreditation schemes to enable councils to better target their resources on those landlords who fail to provide decent standard accommodation.
“This must also be matched with increased consumer awareness as envisaged in the strategy. it is essential that tenants are aware of the measures designed to protect them which are supported by all good landlords.”
