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The English obsession with house prices is well-known. In densely populated areas, residents often oppose new housing developments for fear of impacting property values.
Planning approval for new housing projects in England has reached its lowest level in over 15 years. This may be seen as a triumph for local democracy by the “not in my backyard” (Nimby) brigade. However, this planning drought in England will only lead to future problems.
Housing experts are skeptical about England’s ability to meet its target of building 300,000 new homes per year by the mid-2020s. Housebuilders are currently seeking permission for homes that won’t be built until 2025, indicating a worsening supply shortage.
According to lagging data from the Home Builders Federation, the number of approved housing projects in England dropped to 2,456 in the second quarter, a 20% decrease compared to the same period last year. This is the lowest quarterly level since data collection began in 2006.
In the second quarter, the number of approved homes in England fell by 13% year on year, totaling just over 54,200. Over the past four quarters, a total of 265,223 homes have been approved. Housebuilders are reducing new projects due to declining sales, higher lending rates, and the withdrawal of the UK government’s subsidy for first-time buyers, Help to Buy.
Last year, the government proposed giving local communities more control over developments in their areas, but the plans were defeated in the UK parliament’s House of Lords after opposition from environmental groups.
Although valuations of major UK housebuilders have recovered from last year, concerns over declining sales persist. Investors are hopeful that political discussions on housing may lead to a replacement for Help to Buy.
Deregulating planning or implementing a development land tax are radical solutions that could address the housing supply issue, but neither major political party is willing to take on the potential unpopularity of such measures. The restriction of housing supply remains deeply rooted in England’s political system.
The Lex team is keen to hear from readers. Please share your thoughts on possible ways to improve the supply of new homes in the comments section below.
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