Bridging the Gap

The UK economic and political landscape has been dominated by Brexit over the past 2½ years. The next 2½ years are likely to be similar, albeit dealing with a different phase of the process.
As Government pivots back towards domestic policy issues, new housing supply across the range of tenures, geographies and affordability levels will be reasserted as the number 1 priority.

Yet, incessant focus on enabling first-time buyers has been to the detriment of priorities that address the needs of older people, alongside the very basic capital investment required in affordable housing to offset the ballooning housing benefit bill.

Despite a supercharged and proactive stance from Homes England, the challenges of housing delivery will likely get harder, not easier.

Build cost inflation remains stubbornly persistent as the skills crisis grows. Irrespective of Brexit impacts on labour, there is little to reverse the tide of greying workers retiring and the need for the industry to pivot towards manufactured solutions in digital construction.

The Letwin Review also encourages diversity on large sites to speed up delivery rates. This will require some creativity from master developers, but there are options such as a more mature multi-family offer alongside the spectrum of affordable housing solutions and – where appropriate – even co-living solutions.

The lifting of borrowing caps is also expected to spawn a new wave of direct delivery from Local Authorities. However, without their former expertise or current capacity for direct delivery, Local Authority delivery is likely to be more successful through partnerships with the private sector in the medium-term. This is not without its own challenges of managing the political backlash from untrusting constituents and as a result the flow of supply from Local Authorities is more likely to be a trickle than flood-like.

As with the Letwin Review, policy attention is more likely to shift to land value as a way to create more headroom to deliver homes at or below current market prices. This is right in principle, but very difficult in practice. Where private land markets perceive insufficient upside from selling, land will be harder to come by and the entire process of delivery will be undermined at the first hurdle. 

As ever, both opportunities and challenges are equally well represented for the UK housing market over the year ahead.

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