Housing market news; white paper reforms

In February 2017 communities’ secretary Sajid Javid presented a housing white paper entitled ‘Fixing our broken housing market’ to government. According to Christine Whitehead of the London School of Economics there have been about 200 governmental housing initiatives since 2010, however; this paper does go some way to tackle planning permission, land banking and green belt development. All three issues are new-build supply blockers. The UK’s new home build target is 250,000 per annum, which was last met in the year 1979-1980.

New-build supply blockers

 ‘Fixing our broken housing market’ aims to force councils and big developers to boost the supply of new homes.

  1. The white paper proposes a new standardised framework for calculating what needs to be built by councils.
  2. Councils that miss their agreed new-build target may have to surrender ‘planning control’ to central government.
  3. Owning plots of land with planning permission on them and not developing them in a timely fashion (land banking) will result in ‘use it or lose it’ punishments where councils will be able to compulsorily purchase land.
  4. Extra help will go towards SME construction firms as regards bidding for new-build contracts.
  5. Higher charges will be levied against developers.

Many criticise the white paper for not going far enough the elephant in the room being the absence of any green belt development reforms. A late decision was made by the government to stand by existing green belt development restrictions ahead of the white paper being presented. Director general for the Institute of Economic Affairs Mark Littlewood said: “The only surefire way to bring down housing costs is to relax our highly restrictive planning laws. Not all greenbelt land need be sacrosanct so it’s a shame to see politics trump sensible economics.”

Regeneration expert Barney Stringer believes that releasing 60% of green belt within 2km of a railway station would create space for 2m new homes. Britain has the highest proportion of urban dwelling citizens, at 90%, of any large Western country. This is unsurprising as the majority of jobs are in cities and towns; and it now takes an average middle-income household 20 years to save up for a deposit for a house.

Long-term renters get some help

Some attention has been given to long-term renters or generation rent. The rate of homeownership, particularly amongst the young (25-34 years’ old), has fallen by 30 percentage points since 1992.

  1. Planning regulations are being changed to favour construction of affordable rental properties over homes to buy.
  2. Echoing a Labour party policy to extend rent tenancies, the white paper proposes three-year tenancies for some renters.

House prices and mortgage options

The price of houses in London has slowed, which has dampened the market for the whole of the UK. One year ago London house prices were rising by 15% year-on-year. However, from March 2016 to March 2017 house prices in London grew by 1.5%.

House prices across the UK as a whole for March 2017 were down 0.6% compared with February. The average cost of a home is £215,848 which; has been the case for almost a year.

The drop in prices is good news for would be house hunters and the government has developed three finance products to suit the changing homeowner market:

  1. Help-to-buy ISA – the applicant must be saving up for a first home. The government will contribute up to 25% on top of savings up to the value of £3,000 on top of individual ISA savings totaling £12,000.
  2. Lifetime ISA – the applicant must be a UK resident aged between 18-39 years’ old. One lifetime ISA per person per tax year may be opened with a maximum investment of £4,000 per tax year. The government will top up savings by £1,000 tax-free, per tax year (25%); if you have saved £4,000.
  3. Lifetime mortgages for over 55’s – the applicant must be a UK homeowner aged 55 or over, mortgages can be used to unlock house wealth, whether applicants are retired or not.

With a general election looming, we are sure that there will be more changes to housing policy and mortgage finance options. We would advise you to speak to an IFA. Here at MarchwoodIFA we have specialist mortgage, ISA and lifetime mortgage financial advisors. Please call 01243 532 635 to arrange a consultation.