Where is my castle?

Over the last few weeks we have heard the same noises regarding housing shortages that we have become used to. The political hot potato, the election winner, the election loser, the support gainer, the housing market by its very nature stirs the fire within the soul. We are British. We want to own our own house, it is after all what gives the King his place in society. His castle. The bigger the castle the bigger the king. And we have too many kings and not enough castles. Still.

Late December saw the government bring to an end the Help to Buy loan scheme. This helped more than 100,000 individuals / couples to take a step on the housing ladder. Some argue that it helped push up house prices, Shelter being quite vocal in their view, whilst others, including the Council of Mortgage Lenders proclaiming it worked very well. At the end of quarter 3, 2016, the treasury had only had to pay out £17,411 to compensate lenders so you might say early indicators suggested it was a sound scheme (£12bn of provision had been set aside for compensation) but with interest rates at somewhat record lows time with tell. Not to be confused with the Help to Buy Equity Loan scheme (available on those shortage of new builds) which stays in place, currently, until 2020. But alas, this doesn’t provide more castles.

But! Fear not, as on the 3rd Jan, Gavin Barnwell, Housing Minister has confirmed that 2017 will see the first starter houses being built on brownfield sites across the country designed to address housing shortages. These houses (source – www.gov.uk/government/news/) will be built “exclusively for first-time buyers between 23 and 40 years old at a discount of at least 20% below market value”. The paper goes on but without really using the words ‘extra’, ‘additional’, ‘further’ or anything to suggest this is over and above the normal circa 140k unit built over the last couple of years. In an earlier blog I refer to the 250k mark that is needed to build 1 million new houses by 2020… Every governments pledge since the dawn of time. We still don’t have enough castles.

housing shortagesA view on the UK’s housing shortages

There continues to be a quartet of challenges:

  • Whilst uncertainty lies around economy, Brexit, the last recession and the next recession why would house builders aggressively push to build more homes? The return on investment for investors has grown well over the last 3 years even factoring in the shock to housebuilder shares post Brexit, which generally sit around 20% lower following that eventful referendum. Confidence breeds prosperity and internal and external confidence are two very differing things. Barratt’s chief executive, David Thomas made a rather interesting statement following Brexit which summarises the pensive nature of the current status quo, “we are mindful of the potential for economic uncertainty created by the outcome of the EU referendum. However market fundamentals are robust.” said Thomas. The demand is there for more castles. But we are mindful of the journey to build more castles.
  • The second challenge is the continuing skills gap. At Alconbury Weald iMet are developing, in partnership with local funds and colleges one of the largest construction education centres in the UK. This will go a little way to addressing the continuing shortage of site managers, brick layers, ground workers, plumbers, electricians. We continue to suffer from the knock on from the last recession combined with the lack of appeal at a younger age to drive talented schoolers into these sectors. With the ongoing challenges with immigration and Brexit it’s hard to see a net increase of skilled sector workers over the next couple of years.
  • The third quarter is our planning laws, the length of time to take and the challenges that comes with that. Parish councils, District councils, county councils, courts of appeal. Elected mayors will play yet another layer of really driving through the planning applications needed to make a real difference. In 1955 we probably set a little precedent with green belt land.  There are 514,000 hectares surrounding London and Surrey has more space dedicated to golf course than housing. A small fraction of this would supply a great deal of land to fill some of the void. We remain in a world governed by some pretty aged laws. Radical rethink will solve the continuing Einstein insanity definition of continuing with the same process and expecting a differing result.
  • Lastly we are in the UK. The weather in unpredictable, our hours of daylight vary dramatically and the rain, cold, wind and snow combined with frost are unpredictable. Of course this limits what we can build safely in the winter and relies on aggressive activity in the summer months. Combined with a desire to have weeks off on holiday in the summer, school holidays and Christmas holidays means the degree of productivity can be a varying one. We work some of the longest hours in Europe but we continue to build houses outside, so we continue to be at the mercy of the weather gods. This doesn’t help our desire for more castles.

Any google search will send you to a number of experts indicating how we fix the housing shortages crisis. Politicians will talk about it in many manifestos. I’m not an expert but the quartet of challenges will remain, uncertainty, skills shortage, planning laws and weather. The Normans didn’t have to deal with those challenges apart from the weather. They built plenty of castles. In the rain.

Simon Kidney
Chief Operating Officer
Robinson Manufacturing Ltd