Commercial Market Report: Improving housing affordability

With an upcoming election, a recent ComRes study surveyed the British population on what issues they thought should be prioritised in manifestos.

At a time where housing supply and affordability are rarely far from the headlines, it is perhaps unsurprising that improving housing affordability ranked fairly highly among key issues: this was particularly true of 18-24 year olds, with 23 per cent choosing housing affordability as a key issue, compared with 11 per cent who opted for reducing the budget deficit.

In light of this, George Osborne’s Budget announcement of a ‘Help to Buy’ ISA is a good policy among a raft of measures from all parties to provide support to first time buyers who see themselves as increasingly priced out of the property market, particularly in the South East.

The Help to Buy ISA for first time buyers appears to be a good initiative at first sight, and I’m sure a number of providers, including Aldermore will be looking into offering this to our customers.

With the election looming, all parties are keen to set out their solutions to the issues surrounding housing affordability.

The Liberal Democrats have said they would give first-time buyers a leg up on to the housing ladder with a “rent-to-own” scheme, hoping to create 30,000 rent-to-own homes by 2020. Labour have looked at introducing a new formula to prevent excessive rental increases.

In addition to the ‘Help to Buy’ scheme and talks of a return of ‘Right to Buy’, there has been a steady stream of announcements looking to support first time buyers in particular.    

However, while this support is ever increasing and present in all parties’ manifestos, new policies have tended to favour demand-side solutions, while remaining somewhat muted on equivalent supply-side suggestions.

While all parties have committed to far higher levels of house building over the coming years (200,000 more homes a year by 2020 from Labour and an optimistic 300,000 from the Lib Dems), an emphasis on policies that result in higher levels of demand are likely to have a knock-on effect of exacerbating the strain on housing supply.

This is not to say that initiatives such as Help to Buy are not successful (69 per cent of Aldermore’s Help to Buy applicants are first time buyers), but a housing strategy must take a holistic view of the market to ensure the best outcome.

The recent budget announcement of the introduction of 20 new housing zones, which will build 45,000 homes on brownfield sites across the country, is encouraging but much more is needed. Labour’s proposed Housing Growth Areas, where councils will be able to reserve a proportion of new homes for up to two months for first-time buyers is another welcome sign of a move to a clear agenda to increase housing supply among political parties.

Developers and the market will look to legislators for assurance when it comes to embarking on projects that may last five or six years, and a show of support for both demand and supply side policies will be a positive influence on the industry as a whole.

Attributed to Charles Haresnape, Managing Director, Mortgages and Commercial Lending, Aldermore