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Whether it’s unaffordable house prices, higher mortgage rates, rising rents or increased homelessness: the housing market seems to be stuck in an endless crisis.
There remains an insatiable appetite to buy real estate. Many of those who do not own property strive and put their savings towards achieving it.
It is a dream that is increasingly out of reach for many, as the chronic shortage of housing causes house prices to rise and rents to rise.
Government interventions often seem to add fuel to the fire. Stamp duty holidays, Help to Buy, Right to Buy and other schemes were aimed at helping more people onto the ladder.
Can you make it? Every month we speak with a real estate expert about the housing crisis
But while many of these initiatives were successful, they also had the effect of further increasing house prices for subsequent initiatives.
Worst of all, homelessness is increasing. More than 300,000 people are homeless in England, according to research by the charity Shelter.
Every month in the This is Money series we speak to a property expert to ask them what’s wrong with the UK housing market – and how they would fix it.
This month we spoke to Peter Stimson, head of the product development team at lender MPowered Mortgages. His job consists of creating new mortgage products and setting prices for all residential mortgages.
How would you fix the housing market?
Peter Stimson answers: The answer is simple: we need more housing.
Government schemes such as Help to Buy, shared ownership and shared equity have been relatively unsuccessful in making a real difference in solving the home ownership problem we have in this country.
Trying to get people into the housing market when there is a fundamental lack of supply ultimately drives up house prices, making housing even less affordable in the long run.
We need to start by recognizing that we have a broken planning system that is simply unable to deliver the level of housing we need.
Peter Stimson, head of the product development team at MPowered Mortgages, says we need more homes and that starts with recognizing the ‘broken’ planning system
Year after year we consistently fail to achieve even a reasonable level of new housing.
The Center for Cities estimates that we currently have a backlog of 4.3 million homes missing from the national housing market due to our inability to build the required numbers over the past thirty years.
Ultimately, tackling the problem means building 442,000 homes per year over the next 25 years, or 654,000 per year over the next ten years in England alone.
Even if you don’t fully agree with these numbers, the evidence that we are not building enough homes and have not been doing so for years is overwhelming and the numbers need to rise substantially to address the fundamental imbalance between supply and demand.
Why hasn’t the government addressed the planning issues?
The government did attempt to reform the planning system through its white paper ‘Planning for the Future’, which was published in 2020.
It focused on streamlining and modernizing processes and, most importantly, ensuring that more land becomes available for development where it is needed.
Britain should follow the French example and have clearly defined rules around house building so you know what you can build and where
However, the government abandoned this idea when it realized the scale of opposition it faced in the counties and homelands and how many seats it could lose.
And let’s not forget that Labor also opposed most of the reforms in the Planning for the Future initiative.
We are therefore still left with the 1947 planning legislation, a set of rules introduced almost 80 years ago.
As well as delegating planning powers to centralized local authorities, England and Wales remains the only place in the world where planning is ‘discretionary’.
In countries like France, for example, there are clearly defined rules surrounding housing construction, so you know what you can build and where.
In my view, Britain should follow the French example and adopt a similar approach, rather than relying on the discretion of local authorities to grant such permission when Nimbys (‘not in my backyard’) and councilors are elected on basis of ‘stop development’. Mandates can prevent housing construction.
Housing shortage: The Center for Cities estimates that we currently have a backlog of 4.3 million homes missing from the national housing market
Ultimately, we can’t keep kicking the can down the road. It is not without reason that we have the most expensive homes in Western Europe and that is not something to be proud of.
If we really want to solve this housing shortage problem, there needs to be a multi-party initiative aimed at reforming the planning system.
Does a greater supply make housing more affordable?
Simply put: yes of course – although we do have to build in locations where there is demand.
Stagnant supply, together with rising demand, especially in attractive cities such as London, Cambridge and Oxford, is putting upward pressure on prices.
It doesn’t take a genius to conclude that if we have more housing in such areas, it will help keep house prices in check and at least give future generations a chance to own their own home.
Building new homes will also provide a major boost to the construction industry and the wider economy, supporting thousands of jobs and saving the government and taxpayers money in the longer term.
The solution is obvious. Now we just need a few politicians who have the guts to tackle a 30-year-old problem.
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