The big boys of the housing sector can’t be the only developers we rely on
New housing policy from Westminster has been pretty much non-existent, but the market itself can enable more new homes to be built by looking outside of the top developers, writes Phil Hooper.
2023 started off much as it finished in the housing market – to-ing and fro-ing on targets, lots of ideas from the private sector but no firm commitment to a practical plan to address the market disruption.
Faced with rising material costs, the market recoil from the mini-budget, energy price hikes and concerns over outages, a shortage of builders and supply chain issues no doubt partly accelerated by Brexit, it’s not an easy time to be a developer.
Michael Gove, as Housing Secretary, has rightly been focused on dealing with the ongoing scandal of unsafe cladding on high rise buildings. But it has also come at the sacrifice of a wider policy for housing, especially after targets for new homes were put on the chopping block thanks a group of noise politicians.
In the interim, the wider housing market needs to look at where it can improve, instead of waiting politicians.
One thing that has been consistent is that for too long, the UK has relied only on the larger house builders to deliver the mass of units needed. But the reality is that the larger house builders between them don’t deliver half of what’s needed – targets or no targets. While they still have a very important role to play, more focus needs to also be put to medium-sized and smaller housebuilders.
Smaller house builders are spread out regionally, often understand the locality of where they are building, for the most part pay huge attention to sustainability and design, and tend to actively support local.
By spreading out the pressure of housing delivery across the regions and expanding support outside of only the top handful of house builders and empowering the middle tier, we will see more numbers of viable development sites coming forwards. From a risk perspective, we will need to ‘bank’ less on fewer large scale developments.
And that’s where the alternative lenders come in. Increasing in market share for the last 10 years, in the first half of 2022 their property lending overtook that of the traditional banks for the first time. To enable more homes to be build, this should continue. Doing this with the backing of investors across sectors creates the capability to accelerate lending to house builders and developers.
Alternative lenders mean there is more support in the market for house builders of all sizes – yes, the larger ones, but not just them. Consumer confidence has been plummeting in the UK, as well as in the housing sector specifically. In December last year, the number of mortgages on offer reached the lowest levels since the start of the pandemic, when sales of new homes almost froze entirely.
The market needs a boost, housing needs delivery and smaller companies need financing as well as the big boys.