Housing Market Review

Andrew Whitaker

Planning Director

Presentation Outline

• Supply/demand imbalance

• Consequences of undersupply

• Market trends

• How to increase housing supply

• Policy tensions

Supply/Demand Imbalance

2008-based household projections

Housing stock and households, England (2008)       (000)     (000)  Stock   Stock  Total 22,398   Total stock 22,398  

Vacant 783   Vacancies @ 2% 448  

Second homes 246   Second homes 246  

Total Occupied 21,369   Total Occupied 21,704             Households     Households    

Independent 21,731   Independent 21,731  ‘Constrained' 511   ‘Constrained' 511  Temporary 11   Temporary 11  

Total 22,253   Total 22,253             Adjusted deficit -884  Adjusted deficit -549  

So how many dwellings do we need?

New Households

2008-based projections 2008-31 (England)

• Principal projection: 232,000 h’hs pa

Note: Zero net migration: 149,000 h’hs pa (i.e. migration 36% of principal projection)

So how many dwellings do we need?

Plus unmet demand (NHPAU estimates 2008)• Constrained demand, concealed households,

temporary accommodation: 27,450 h’hs pa

Plus allowances for• 2nd homes: 2,870 pa• Vacancies: 7,280 pa

So how many dwellings do we need?

TOTAL270,000 dwellings per year

(more if 2008-11 constrained demand/need added)

Consequences of Under-supply

Under-supply CrisisConsequences/Stress Indicators

• High house prices against incomes• Increased house price volatility• House building jobs & contribution to GDP depressed• Local labour shortages, including public services• Reduced labour mobility• Upward wage pressures• Unemployment aggravated• Regional economic differences reinforced• Loss of company competitiveness

Under-supply CrisisConsequences/Stress Indicators

• Uneven distributional impact (age, income)• Excessive household debt (especially young)• First-time buyers:

Historic low numbers

80% dependent on financial assistance

Average age unassisted: 31

Average deposit 2010: £31,000 vs income £33,000• Declining household formation 20-39 age group• Living at home: 20-34 year olds (2008): 29% males, 18% females • Delayed marriage and first child• Concealed households (~150,000)

Under-supply CrisisConsequences/Stress Indicators

• Falling owner occupation in England since 2003/rising PRS• Rental yields inadequate for institutional investors• Escalating ‘affordable housing’ need• Homelessness• Waiting lists (1.8m households, nearly 5m people)• Overcrowding 630,000 (2.9%) households (England) vs 7.9m under-

occupying (36.9%)• Low vacancy and demolitions (1,100 year replacement rate!)• Dwelling and plot sizes squeezed• State drunk on “land value capture” – policy & regulation, taxation

Market Trends

Excess demand

New Build Trends

Budget Housing Measures• FirstBuy: 10,000 FTBs new homes• Planning reform – pro growth• Non-residential to residential• PRS: SDLT bulk purchases and REITs• Land auctions• Public sector land disposal• Burden of regulation and zero carbon

How to Increase Supply

Restoring Effective Demand

Mortgage Market• Mortgage supply and high LTVs• Refinancing SLS, CGS, RMBS• Basle II and III• FSA Mortgage Market Reform• Competition (6 lenders ~90% approvals)• Discriminatory lending new build vs second hand

Increasing Investor Demand

Private Rented Sector• Buy-to-let small landlords• Institutional investors• Non-institutional scale investors• Housing developers• RSLs• Budget measures (SDLT, REITs)

Reviving Supply

Permissioned Land• Planning reforms, especially NPPF (pro growth)

• New Homes Bonus

• Greenfield land

• Local authority behaviour

• Local community attitudes

Reviving SupplyViable Land: Regulatory Burden

• Spending Review commitment – reduce ‘total regulatory burden’ on home building by 2015

• One in one out rule, etc.

• Plan for Growth pressure on local authorities

• Zero carbon new definition

• Local Standards Framework (flawed concept) – instead local RIAs and plan viability testing

Reviving Supply

Policy Tensions (contradictions?)

• Localism vs pro-growth NPPF

• Localism vs reducing regulatory burden

• Land value capture vs incentivising developers and land owners (not just communities)

Housing Market Review

Andrew Whitaker

Planning Director