Summary: Successive governments have been grossly negligent in their approach to providing adequate levels of housing within the UK. A radical programme of investment in new housing managed by local government will allow us to catch up with the backlog. It would involve training and employing many new skilled construction workers. We must plan to use advanced construction techniques wherever possible such as the widespread use of high quality, modern prefabricated buildings. As a major infrastructure programme this will have an important role in boosting activity rapidly in the British economy.
The collapse in British housebuilding since 2008 exacerbated the shortages that had already accumulated by then. Since 2010 the number of social rent homes being built has dropped by 97%. Affordable home completions in the current year are running at around half that of the previous year. One of the big problems in building affordable homes is that many developers accept a requirement from the planners of a good percentage of affordable homes. These might typically be around 40%. However it is almost routine that the developers go back to the planners and ask for a reduction in the affordable home percentage. In the Cambridge area recently 40% requirement was reduced to around 6%. Shortly afterwards the developers marketed these properties energetically in China.
Most agree that we need to build about 250,000 new homes each year just to keep up with demand. Annual completions are running at under half that level. Approximately 80% of completions (about 90,000 per annum) come from the private sector which is dominated by eight or nine big housebuilders who currently hold enough land for about 600,000 new homes.
They deny they are hoarding land to allow scarcity to keep prices high but they do have enough land for over six years supply at their present building rate. The rate of granting detailed planning permission is currently running in excess of 250,000 homes per annum so at more than twice the current construction rate. Since 2008 the number of small builders has dropped substantially.
Claims that planning delays are limiting construction seem to be greatly exaggerated. Indeed an increased housing programme would probably need boosting the size of planning departments to keep delays to a minimum in future. In order to accelerate a housebuilding programme it may be necessary to acquire land with planning permission on a “use it or lose it” basis. An appropriate valuation might be at the time the most recent planning permission was granted.
Since Margaret Thatcher introduced the right-to-buy over 30 years ago around 2 million social houses have been sold by local authorities who are currently forbidden from replacing them. Most new social housing is provided by Housing Associations, and their rate of construction would increase radically if the regulation of Housing Associations was relaxed.
There are over 200,000 homes in England empty for more than six months (the usual definition of an empty home). This does not count second homes or holiday homes. First-time buyers are finding it increasingly difficult to get on the housing ladder. In the past, house price inflation was made more manageable as salaries rose but median salary increases are running way below median house price increases.
A typical first-time buyer today who cannot afford to get on the housing ladder will be even further from achieving that next year. The construction of low-cost affordable housing is now down at very low levels indeed. In essence, if you cannot afford to buy a house today you will be even less able to afford it tomorrow. That has gone on now for nearly 10 years and is a direct consequence of austerity and public sector pay squeezes.
It is estimated that there are 1.8 million people today on the social housing waiting register in England. In order to catch up with the backlog as well as keeping up with demand we need to target a building rate of between 350,000 and 400,000 new homes per annum. This is an enormous increase on current rate of about 120,000 per annum and will be difficult to achieve without a substantial effort.
There are genuine problems in simply turning on such a dramatic increase in building rate. Simply scaling present construction methods will require a tripling of brick production, difficult as many brick factories were mothballed following 2008 and the collapse in the construction industry. It is thought that many of these mothballed factories would be too decayed and inefficient to restart.
Current statistics show that it takes about 6.6 construction workers one year to build one house. Hundreds of thousands of new skilled bricklayers, plumbers, carpenters and even architects would need to be trained. Finding such people to train will be difficult particularly as the demand for new housing is concentrated in the relatively low unemployment areas in the south of England.
And then there is the small matter of funding. The obsession of the Cameron government with austerity would make this funding impossible but most economists agree that housebuilding is a genuine investment in infrastructure that must be accounted for outside the day-to-day economy. Now that George Osborne has been deposed even the Conservative government seems to accept that rampant austerity is fundamentally damaging to the whole of our economy.
The British government can borrow money at present at ridiculously low interest rates for long periods. So raising the funds for an ambitious programme is practical in the present economic climate. This would best be done by the Local Authorities who would be required to manage this dramatic increase in housebuilding. Clearly a number of radical changes in our approach to housebuilding will be needed for this to be achievable.
It does seem odd in the 21st-century that most houses in the UK are still built by taking tens of thousands of bricks, mixing up cement and sticking them altogether. In much of Europe many buildings are prefabricated, built in modular form such as walls with windows, doors, electricity and plumbing already built in that can be assembled in just a few days.
The construction site must be prepared in advance but this is a relatively quick procedure compared with the business of conventional house construction in the UK. Modern European prefabricated houses are designed and built to a high standard, often much better than conventional low-cost UK housing standards. Prefabricated designs and construction procedures are well established and could be duplicated in the UK leading to substantial employment opportunities that could easily be in unemployment blackspots in the UK.
The cost of these properties are, if anything, cheaper than conventional houses and dramatically quicker to construct. Above all they would reduce greatly the need to train as many skilled individuals close to where the houses are needed, though many would still be required.
The extraordinary cost of houses in many parts of the country is a very poor guide to the actual cost of building a new property. There is no such thing as a standard house. The needs of single people right through to those of large families need to be addressed. One of the most helpful metrics is the typical floor area per person that we find in modern houses today. Our standards must not be the minimum but provide for appropriate storage space and space for the equipment and facilities most of us would take for granted.
In the UK, typical house floor areas work out to be approximately 33 m² per head although this is on the low side when compared with houses in the rest of Europe (40 m² for Sweden, 43 m² for France and 55 m² in Germany). Conventional construction works out at about £1200/ m² in Greater London, £1050 in the south-east of England and perhaps £900 in the Midlands. Building to a high standard would add between £150 and £200 per square metre to this cost.
This makes conventional construction roughly at the £120,000 level for four people in three bedrooms and to which must be added the cost of land. Most developments try to get to about 12 houses per acre which adds between £30,000 and £60,000 to the cost for a single property for land already zoned for residential development in our close to urban areas. In rural areas land prices can be significantly less particularly for land currently used for farming on the margins of existing developments. So even for a good quality three-bedroom house construction costs are well under £200,000.
How much do prefabricated houses actually cost? We are not thinking here of the sort of prefabs that were built after the second war as emergency short-term accommodation. Modern prefabricated houses are designed to last, to provide high standards of comfort and to be in no way inferior to houses built with thousands of bricks and buckets of cement. Good examples of high quality prefabricated homes come from SvenskHomes come out to be almost identical to conventional construction costs.
In practice, setting up major facilities in the UK to carry out the prefabrication would lead to highly significant economies. Prefabrication does not mean every house the same. Prefabrication uses modular components which are combined in different ways to give very different shapes and sizes of properties. They may be tailored to the requirements locally and provide anything from highly affordable properties up to some that would be quite luxurious by any standards.
The mixture on one site can be whatever suits the local requirement. We would need to insist on a wide mix of different styles and sizes of housing within a single development. The creation of ghettos or gated communities would be completely unacceptable! Managing the ground works and site construction as a large site will bring costs down quite markedly.
Each property needs a flat concrete plinth on which it is constructed. The site plan establishes the sizes, orientations and positions of each plinth. The site is developed by creating access roads and pavements with all the utilities in place right up to the individual properties. In planning the site it is important to include community centres, shops, GP surgeries and school as part of the total plan if we are to produce genuine integrated communities rather than anonymous dormitory villages.
And how much are we talking about for this program? It would take time to ramp up such a substantial scheme but it is incremental nature allows a lot to be achieved on relatively short timescales. The funding that would need to be available for this sort of programme would probably be in the range of £40 billion-£60 billion over 10 years, so less than half the cost of Trident over the same period, and unlike Trident we still have most of the money at the end of 10 years.
Remember that as properties are built they are sold to Local Authorities, Housing Associations, private landlords and conventional house-owners in whatever mixture seems appropriate. The sale of these properties would be close to cost of construction for the first two categories but very much what the market might bear for the other two. Funds raised from sales are remitted directly back into the program. Unlike Trident, the programme would produce good quality housing for vast numbers of people desperately in need of accommodation.
There are enormous constraints at present on local government raising funding but they should in future be allowed to raise funds to manage a major increase in building houses in their own area. Each local government area should be allocated a specific number of houses to be built each year over a 10 year forward look. Each area should establish a Local Government Housing Authority (LGHA) to manage the local plan. The LGHA should fund additional planning officers and fund the necessary training programs, free of student fees, at local technical colleges providing trainees with appropriate certification.
They should identify suitable sites and where local opposition is strong, that opposition should be required to locate sites in their area on which their share of new houses should be built. It is always been possible to build on greenbelt sites in special circumstances but it is expected that a significant amount of new houses will need to be built on greenfield sites such as farmland.
Building on greenbelt land is something that must be considered. There are nearly 4 million acres of greenbelt designated land in the UK. Even building 250,000 homes on greenbelt land would only cover under 1% of greenbelt area. It may therefore be necessary to change planning procedures so that these do not become a significant blockage to completing the programme. Every town, village or hamlet must take its share. If any region resorts to nimbyism then they must be left to sort it out if they don’t want it imposed more centrally. If they cannot sort out it will be imposed!
At present housebuilding can be a very profitable business. The LGHA program would combine a good portion of affordable housing, some of it for social rented housing but always intermixed with housing for commercial sale with the profits going back into the scheme. The construction of low-cost ghettos must always be resisted with good attention given to the quality of the development.
All developments would, of course, need to address community issues such as schools, community centres, GP surgeries, access to public transport etc. At the bottom end of the price range, houses could be sold with minimum profit but with clear covenants so that if they were sold within a certain timeframe commercially then a significant part of the profit would return to the LGHA.
Building large numbers of houses priced at the bottom end of the market would have a major effect in slowing the general rise in house prices that is distorting economic growth in much of the UK. Planners should only reduce the agreed percentage of affordable homes in exceptional circumstances. A developer that got a reduced percentage would then be required to accept a larger percentage on any subsequent developments they sponsored.
Such a program would be a very substantial investment in the UK. It would inject a very great boost to the economy, provide opportunities to train young people in valuable skills but above all make a serious attempt to recover the many years lost while governments wrung their hands about the difficulty of building houses.
Most of the efforts by the LGHAs would bypass the current big housebuilders who could be left to get on with building expensive houses for those that can afford them. This scheme would finally offer hope to millions of young and less well-off people in the UK that they might actually be able to find a home to live in and possibly own.
References: a brief list of articles and sources of information that the reader might care to follow-up.
- Dwellings by tenure in England, information on number of homes built in England and many other general housing statistics: http://england.shelter.org.uk/campaigns_/why_we_campaign/housing_facts_and_figures/subsection?section=housing_supply
- Article in the Guardian newspaper dated 12 January 2015 by Hilary Osborne and Paddy Allen entitled “The Housing Crisis in Charts”. See: https://www.theguardian.com/money/2015/jan/12/the-housing-crisis-in-charts
- BBC article on housebuilding entitled “Why Can’t The UK Build 240,000 Houses a Year?”. See: http://www.bbc.co.uk/news/magazine-30776306
- Building cost calculator: a number of companies provide this sort of capability that you can worse start with http://www.jewson.co.uk/working-with-you/for-self-builders/preliminary-planning/calculators/build-cost-calculator/
- There are many European manufacturers of prefabricated homes. Many of them look absolutely fabulous. Start by looking at: http://houses4you.net/
- This is a 4 year-old article about the effect of British planning restrictions on the cost of the average house. See: http://ralphanomics.blogspot.co.uk/2012/07/british-planning-restrictions-boost.html
- Guardian article dated 20/12/15 by Graham Ruddick entitled “Revealed: Housebuilders Sitting on 600,000 Plots of Land”. See: https://www.theguardian.com/society/2015/dec/30/revealed-housebuilders-sitting-on-450000-plots-of-undeveloped-land
- Guardian article dated 4/1/16 by Dawn Foster entitled “What Will It Take to Build George Osborne’s 400,000 Homes?” It gives a lot of basic statistics about bricks, bricklayers and every other part of the construction chain. See: https://www.theguardian.com/housing-network/2016/jan/04/george-osborne-400000-homes-housebuilding-bricks
- Article on Politics Home website, dated 20 June 2017, by Emilio Casalicchio entitled “Labour fury as new social rent homes plummet by 97%”. See: https://www.politicshome.com/news/uk/communities/housing/news/86856/labour-fury-new-social-rent-homes-plummet-97