David Cameron’s conference speech last month trumpeted his aim of creating a “Generation Buy”. But the government’s proposed reforms may not have the desired effect.
The prime minister’s speech last month at the Conservative Party conference set out what he called “a homeowning revolution”, which would turn “Generation Rent into Generation Buy”.
Effectively, developers will no longer need to offer low-cost rented homes but can instead offer Starter Homes for those under 40 at discounted prices.
The price of these starter homes is £250,000, or £450,000 in London, and the government hopes that this policy will encourage the construction of 200,000 new homes by 2020.
Government under fire
The policy reforms have already met significant criticisms.
Some homeless charities feel these measures are not helping the people most in need and will in fact halt the development of new social rented houses through section 106 agreements, which, along with the Right to Buy policy for housing association tenants, could reduce affordable housing dramatically.
This announcement comes hot on the heels of chancellor George Osborne’s recent speech, in which he declared that planning rules on brownfield sites would be swept away.
“Some homeless charities feel these measures are not helping the people most in need and will in fact halt the development of new social rented houses”
The supply of housing fell to an 11-year low in August according to the National Association of Estate Agents, with many commentators predicting that more than a quarter of South-east planning authorities do not have a five-year housing land supply.
The question is: will these initiatives really make a difference to the housing crisis?
The aforementioned measures allowing developers to bypass planning permissions on brownfield land and providing Starter Homes are welcome, but this will certainly not be enough.
To achieve or even surpass its 200,000-plus annual housebuilding target, government must give serious consideration to other measures.
The reality is that the need for green belt land is outweighed by the need for affordable housing.
Politicians know this, and the public knows it too.
“The need for green belt land is outweighed by the need for affordable housing. Politicians know this, and the public knows it too”
Although official government statistics published this month showed that the total green belt area declined by 2,000 ha between 2013/14 and 2014/15, this represents only a 0.1 per cent drop.
Around 13 per cent of English land, 1.6m hectares in total, remains designated as green belt.
Only a small amount of the least environmentally attractive green belt land is needed to help solve the housing shortage for generations to come.
Adding fuel to the fire
Meanwhile, taxes imposed on property purchasers, owners and sellers add a heavy burden.
The high rates of stamp duty are reducing property transactions, discouraging people to relocate for employment or to downsize from their family home.
Further reform of the current regime would go a long way to making London property a more sustainable and affordable investment.
The reduction in transactions at the £1m-plus level over the last year, partly caused by the stamp duty rises, is ensuring that the necessary downsizing by the older, equity-rich generation is not occurring.
Mr Cameron’s reforms removing inheritance tax on properties worth up to £1m will add fuel to the fire.
The higher end of the market is coming to a standstill, reducing transactions through the market and discouraging developments.
Ultimately, the government needs to stop trying to reduce demand incentives and concentrate on increasing supply.
Stacy Eden is head of property and construction at Crowe Clarke Whitehill