The government has published its new housing strategy which includes a £400 million pot to build 16,000 new homes and guaranteeing first time buyers’ mortgages.
New initiatives outlined in Laying the Foundations: A Housing Strategy for England include a £400 million “Get Britain Building” pot that will enable housebuilders to restart construction on stalled sites that already have planning permission, which the Government claims will to deliver up to 16,000 new homes.
Affordable housing providers will share almost £1.8bn cash to develop new affordable homes. The first £1bn worth of contracts under the Affordable Homes Programme have been confirmed said the government, putting it on track to deliver up to 170,000 new affordable homes across the country by 2015.
In a bid to help first-time buyers frozen out of the market, the government will also guarantee up to 100,000 new mortgages at up to 95 per cent loan to value for new build properties in England.
The scheme will apply to all new build properties, both houses and flats, and will be available to all potential buyers, subject to appropriate underwriting criteria. Mortgages will be available under the scheme from March 2012.
Twenty-five of the UK’s builders have agreed to participate in the scheme, including the three largest – Barratt, Persimmon and Taylor Wimpey.
Meanwhile, housing associations and councils will be able to apply for £50 million of new funding to help bring empty homes back into use.
The Federation of Master Builders (FMB) says the new housing is only a small step in tackling the worst housing crisis for many years.
In particular, it does little to help SME house builders who have the potential to deliver the homes that are required if the right policies and incentives were put in place.
Brian Berry, FMB director of external affairs said: “The scale of the housing problem is now so enormous that we need to increase the supply of new homes by at least 500,000, the equivalent size of Birmingham, by 2015, if we are to meet rising demand. If the government was seriously committed to increasing the supply it would reintroduce housing targets for communities that failed in their obligation to meet local demand.”
“The government’s proposed mortgage indemnity insurance scheme is a welcome step as availability of mortgage finance is a key issue killing off housing demand. Typically a mortgage now requires a 20%-25% deposit with the result that the average first time buyer is now aged 37. Last year only 15% of mortgages required a 10% deposit as compared to 40% before 2008.
“The government has committed to reducing the burdens on the house building sector over the lifetime of the parliament but it is continuing with expensive and complicated policies conceived by the last government during the housing boom. The Community Infrastructure Levy which would add £6,370 to the cost of an average-sized house, and the zero carbon policy which significantly gold plates EU standards will add around £10,000 to the build cost of a home.”
Berry added: “We shouldn’t forget that there are over 700,000 empty homes in England that could be brought back into use. Cutting the rate of VAT from 20% to 5% would help boost the renovation of these properties and help increase the housing supply within a very short time.”
Ian Fletcher, director of policy at the British Property Federation, said that the only solution to the UK’s housing crisis is to encourage institutional investors, such as pension funds, to build-to-let.
Investors are already interested in housing and coupled with today’s political support and increased demand for rental properties, they could help meet the UK’s housing need.
He added: “While many of the conditions are already in place, such as rental demand and now political support, the government face the challenge of firstly finding sufficient scale of opportunity, and also trying to encourage institutions which are unfamiliar with the housing sector to invest.
“Releasing public sector land could help solve the issue of scale. The vast majority of public land is held by local authorities, and there needs to be greater clarity on its release. Negotiating often complex and long-term deals with local authorities can be difficult, and perhaps the HCA could be introduced as an honest broker in tricky negotiations.
He added: “Another vehicle that could encourage institutional investors and boost housing supply is residential REITs (Real Estate Investment Trusts). They’d provide an obvious entrance into the market and an exit strategy, but officials are being a bit over cautious, particularly around issues such as the ability of a REIT to trade. Further discussions are required with the Treasury.”