2017 should be a landmark year for housing policy in the UK: for the first time in decades, housebuilding is at the top of the domestic political agenda, with cross-party consensus on the need for building more homes.
The Government set itself a target to build one million homes by 2020 - equivalent to 200,000 homes a year, significantly more than we have seen since the financial crisis of 2008. In the meantime, house prices have reached record highs; home ownership has reached record lows; and private rents are rising fast. As we approach the midway point of this parliament, there are concerns that uncertainty around Brexit will hamper efforts to address Britain's housing crisis. Here are three key things to look out for in 2017.
1. How many houses are completed
It's good to start with the basics. If we are to address our housing shortage, we are going to need to build more homes. The Government's quarterly reports on housebuilding tell us how many homes have been started, and how many have been completed. Of the two, the latter is key because it tells us how many new homes are actually available for people to live in. The two numbers are not the same - for example, in the year to September, 147,880 homes were started, whereas 141,690 were actually completed.
It's likely that those targets will again be missed because of the economic uncertainty we have seen since the EU referendum. Typically, investment in bricks and mortar is the first thing to be hit by falling confidence. The financial crisis of 2008 had a substantial impact on the UK housing market, with a decline in house prices accompanied by reduced mortgage availability. Developers also found it harder to access the credit they need to fund new developments, and faced with lower than expected house prices, the numbers of homes completed slowed from a pre-crisis high of 220,000 to a low of 140,000.
If uncertainty around Brexit persists into 2017, or if economic conditions worsen as the year progresses, developers will slow down their delivery because they will be less confident that they will find buyers for their homes. While developers currently hold land with planning permission for 460,000 new homes, and many will have started building them, there is no guarantee they will be completed any time soon.
If that happens - if housing completions slow or stagnate - there is little chance that the Government's ambition for one million homes over this Parliament will be met.
2. How the Build to Rent sector fares
One way that this might be alleviated is by the growing 'Build to Rent' sector. Instead of building homes speculatively for sale, which is how most of our homes are built, this growing part of the industry focuses on building homes for rent, typically to young professionals in our big cities. Building for rent is more resilient to market shocks than building for sale, because the demand for rental homes is more resilient - you don't need a mortgage to rent a home. Even in a recession, people need somewhere to live. So those building for rent can do so with more confidence that they will have customers to move in when they are finished.
This is one of the reasons that the Government has directed its focus on the Build to Rent sector as one way of increasing the level of housebuilding, through a £1 billion fund to support private investment, planning and construction. The potential is clear - it's an undeveloped sector in the UK, with 98% of the rental market made up of small-scale landlords.
In 2017, we should see a move from aspiration to reality, with tens of thousands of rented homes expected to be built.
3. What the Government's vision means in practice
Both the Secretary of State, Sajid Javid, and the Housing Minister, Gavin Barwell, have spoken of the need to build more homes, and to do so across all housing types. And the Prime Minister has outlined the need for the state to step in where the market is failing to deliver for those who are just about managing to get by. For many people, rising housing costs are now the biggest strain on their finances.
We will see what this means in practice when the Government publishes its Housing White Paper, expected later this month. It will be interesting to see how much focus is given to addressing the predicted slowdown in the number of homes built for sale, and to supporting Build to Rent and other sources of supply in the private sector.
But if it is to deliver lasting solutions to the housing crisis, the White Paper will also need to lay the ground for government to take a more direct approach to housing supply. ResPublica has recently proposed the formation of a long-term National Housing Fund that would facilitate delivery of up to 75,000 additional homes a year and support the growth of housing associations and smaller developers looking to build more. Something like this would signal a real shift in our approach to housing.Suggest a correction