The government must find new sources of finance to fund the construction of 250,000 new homes per year, if it is to solve the UK’s housing crisis, a new report from the Institute for Public Policy Research (IPPR) has said.
England will have a 750,000 shortfall of homes by 2025, with London, the South East, the East of England and Yorkshire and Humberside the worst affected.
“We are facing a housing crisis, with a huge gap between the supply of new houses and our demand for more homes,” IPPR senior research fellow Andy Hull said. “The forthcoming housing strategy will be a serious test of whether the government appreciates the depth of our housing crisis and is smart enough to unlock the funding to build new homes. We also need Government action to get developers developing.”
Bringing local governments onside is critical to making any new housing strategy work, the IPPR’s report said. Local government pension funds currently have assets of £150 billion; and local government land represents 51 per cent of all publicly held, developable land, the think tank said.
IPPR recommends reforms to development rules to compel developers to build on the land they hold, regulation to improve competitiveness in the housebuilding industry and a national investment bank to finance construction.
Housing benefit also needs to be reformed to lower the level of rent that is covered fully by the system, with partial benefits extended to more expensive properties, according to the IPPR.
A Department for Communities and Local Government spokesman said: "It is important that public pension schemes are suitably protected against risk, and generate returns to protect the interests of local taxpayers. However, the government is keen to encourage more institutional investment in the housing market, including from all pension funds."
A report released earlier in October by the Chartered Institute of Housing (CIH), the National Housing Association (NHA) and Shelter showed that total new housing starts and completions are at historically low levels, and that the government has cut back spending on affordable housing.
In 2010, 102,730 homes were built, according to the report – a fall of 15,000 from the previous year. Private sector construction has not offset a dramatic reduction in the construction of new council housing since the 1980s.
The government has tried to open up new mechanisms for investment in the property markets, announcing proposals to reform the real estate investment trust (REIT) regime in order to try to attract more capital into the sector. Reform to planning legislation is also ongoing, with mixed results to date, the CIH report said.