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Housing White Paper: Hot or Not?

February 8, 2017Article by Paul Avery

Sajid Javid this week released the government’s hotly anticipated housing white paper, a document that has been constantly vaunted, disparaged, debated and delayed since its conception last autumn. The result is a logical and well-meaning set of proposals that, unsurprisingly, fall short of the towering expectations the government set for it.

What the white paper gets right

No one can deny that the document’s scope is ambitious and the goals it sets out are crucially important. The wish list includes:

–          Building more houses (especially affordable ones)

–          Freeing up land to build them on (but not greenbelt)

–          Extensive infrastructure investment to ‘unlock’ housing delivery

–          A more flexible and competitive planning process

–          Buy-in from locals and future residents on design considerations

These aims are welcome, as is an important shift in the government’s tone that takes the needs of renters as seriously as those of first-time buyers. This new emphasis, with its implications for the growing built to rent industry, is particularly relevant to investors – and warrants some commentary.

Build to rent

The white paper declares that “investment in building homes for private rent is increasing, but we have an opportunity to go much further to drive up supply.” Its consistent message is a promise to support the wider market to deliver rented housing by attracting individual and institutional investors.

For developers this will mean continued access to the Build to Rent fund and other schemes, more pliant planning procedures, efforts to take institutional advantages away from the big players, and the provision of sites specifically targeted at smaller developers.

For investors it means a wider offering of opportunities, provided by newly empowered developers or local authorities obliged to pick up the slack. There are no specific incentives up for grabs, but investors are also offered a measure of security and confidence going forward by the government’s renewed appreciation for the sector as a whole.

That represents a shift away from penalising landlords (though the white paper does not rule out the possibility of ‘additional measures’ in future), toward assisting schemes that seek to expand rental supply at the outset. This may spawn new forms of investment that deliver affordable rented accommodation with the aid of government top ups and keep costs low in partnership with councils.

Will ‘built to rent’ become the new ‘buy to let’? We may have to wait to see how transformative these developments will be for investors, but they appear to offer some beneficial room for manoeuvre. Watch this space.

Why the white paper underwhelms

However, the white paper has drawn criticism for its lack of concrete detail about how exactly to achieve its commendable objectives. Many of them have been attempted before with limited success, and though it proposes a raft of sensible tweaks and newish directions, it offers disappointingly little substance about the next steps.

Repeated promises to ‘consult on’ various issues and ‘make sure everyone has a plan’, rather than to outline immediate policy changes and meaty funding programmes, risks underserving the government’s good intentions. But that is an understandably tricky balancing act.

Market forces

In the South East in 2015, the average home increased in value by £29,000, while the average annual salary was £24,542. This means that average houses are slipping further out of reach for average people every year, even if those people somehow manage to save their entire incomes.

It is a grim statistic unless you are a homeowner – like those in London who made an average of £22 every hour of the working week simply by watching values go up (that’s more than they earned by actually working).

The white paper supplies figures like these to show how badly a ‘radical’ new housing strategy is needed. That is right. But these examples also get to the heart of why the document inevitably disappoints.

Haves and have-nots

Rising house prices are a staple of the British economy and understandably sacred to roughly half the people living here, whose present prosperity and plans for retirement owe much to an apparently unstoppable trend that has become a happy counterweight to the certainties of death and taxes.

However, rising values are also shutting non-owners out of the market completely. The government has vocally pledged allegiance to those people. But what would help them the most – enacting measures causing house prices to fall – would alienate the equally populous constituency of people who depend on prices increasing. It would, furthermore, erode faith in the system that makes people want to own property in the first place.

What to do now?

May and Javid are in a bind. They want a housing market that works for everyone, but putting home ownership firmly within reach while preserving one of its most desirable qualities – growing equity – means activating bold promises with equally bold action and plenty of public cash.

Some of the more controversial measures hoped for by commentators include easing of building restrictions on greenbelt land, injecting competition between local councils to attract projects, and proper incentives for older homeowners to downsize. Their omission again comes down to the impossibility of pleasing everyone and the imperative of avoiding a political backlash.

Much depends on what happens next. A white paper is after all just an outline – the beginning of a process. Though not the historic ‘step-change’ it professes to be, with enthusiastic uptake by local authorities and the private sector, the government’s strategy could yet spark the lasting change this country needs.

We will provide more update and opinion in the coming months as the market evolves.

Author

Paul Avery

Paul joined us in 2016 to lead our in-house research efforts, producing reports and guidance for clients as well as the strategic market analysis behind our new project launches. His background is in sustainability in the construction sector, and he is currently being trained in property valuation to further bulk up his investment creds.
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