Despite the Chancellor’s decision to remove stamp duty for first-time buyers, over the past year there sadly have been no major reforms to the Government’s housing policy. Although this is understandable – as the 2017 General Election and the Brexit process have dominated all aspects of the political landscape – the failure to build on the policy initiatives set out in the Housing White Paper means that house prices continue to outperform wages, and demand outstrips supply.
Rather than being a recent problem, housing affordability over the past 20 years has deteriorated according to the latest report from the Office of National Statistics (ONS). As the average price paid for residential property in England and Wales increased by 259% between 1997 and 2016; the average individual annual earnings increased by 68% in the same period. While property prices continue to rise and housing supply stalls, the Government needs to adopt a strategic policy framework to combat these problems. Further inaction means that it will be even less obtainable for first-time buyers to get on the property ladder.
With Secretary of State for Communities and Local Government, Sajid Javid, announcing changes to relax housing extension regulations earlier this year, it seems like the Government is finally ready to make bold policy decisions in the property market. Making it easier for homeowners and developers to add two additional storeys on top of existing properties, the Government is thinking creatively in its attempts to improve housing supply.
New policy ideas alongside the creation of the Housing Implementation Taskforce in January shows that Theresa May is ready to become far more focused in her Government’s efforts to reform the property market.
A good reform?
Sajid Javid’s announcement about changes to planning permission is a step in the right direction. Relaxing extension regulations, although seemingly minor, is practical and simply makes sense. Rather than increasing supply where there is less demand, the reforms provide extra homes where there is a lack of affordability and movement in the market; namely, in inner-city areas.
For London especially – where demand for properties to buy or rent is highly competitive and increasingly expensive – adding two storeys provides developers, businesses and homeowners the opportunity to create flats to rent as well as building additional space to upgrade their existing home.
A Market Financial Solutions (MFS) survey of more than 2000 UK adults found that the policy is not just practical but popular. With 81% of the UK not wanting to live in a new-build housing development and 79% urging the Government to focus more on supporting the refurbishment or renovation of existing properties to meet housing demand, Sajid Javid’s decision to relax housing extensions provides the public with homes they actually want to live in.
Are housing extensions enough?
While recent efforts by the Government are welcomed by homeowners and businesses alike, relaxing extension regulations alone is not enough. The policy change only increases housing supply in highly populated areas by adding housing supply on existing builds. Lacking a strategy for new builds in a wider housing policy framework means the country isn’t able to keep up with heightened demand. The scale of the challenges in the property market is far too great for Sajid Javid’s reforms to act as a silver bullet.
As the UK population is projected to grow by 3.6 million (5.5%) over the next 10 years – from an estimated 65.6 million in 2016 to 69.2 million in 2026 – the Government should be bolder in encouraging growth to keep up with demand in the property market.
As I write, the Spring Statement is planning to be addressed, where the Government has an opportunity to build on its recent reforms and start making a wider housing policy framework a reality. Although it has been reported that the Chancellor Philip Hammond has shortened down his Spring Statement to 15 minutes, there is still a possibility that there may be changes to the Government’s housing policy. Rather than repeating last year’s mistake in not adopting any of the initiatives outlined in the Housing White Paper, Theresa May must take a stand and start adopting a robust housing policy for the future.