Without private investment, the housing crisis will keep spiralling out of our hands
In the UK there is a chronic shortage of new homes and a lack of capital to invest in making our existing housing more sustainable. Politicians and policymakers have been plagued by this in the UK and across the globe for years, if not decades. The government has an ambitious target of 300,000 new homes a year, but in the year to September 2021 less than two thirds of the homes needed to meet this goal were built. This shortfall has left many people unable to get their foot on to the housing ladder and the national average age for a homeowner has steadily risen.
At the same time, there are a number of countries pursuing policies that would make it harder for outside investors to help increase the supply and quality of housing. In some countries, we are even seeing politicians seeking to ban institutional investors altogether from the housing market, deterring possible investors from plugging capital into this critical area. This is doubly wrongheaded as much of the money investors are looking to deploy comes from pension funds. It is the pensioners of tomorrow investing in the homeowners of today, a virtuous circle that gives more people the chance to get on to the property ladder quicker and enjoy a comfortable retirement when it comes, all the while reducing the state’s financial burden of creating the needed housing supply.
Pursuing policies that stifle private investment harms communities by decreasing supply and pushing up costs, perpetuating the very problems governments are trying to solve. What is really needed, simply put, is investment in new homes, and quickly.
The UK has already proven itself a very attractive place for investors, with a diverse range of institutions backing businesses in a diverse range of industries – from life science to the creative sectors. But in housing, the government cannot meet its ambitious targets alone. We must foster public-private partnerships to deliver the quality homes that are desperately needed.
Last year Sage Housing became the largest provider of new-build affordable housing in the UK and has just set a new target to deliver 30,000 homes by 2030 – an increase of 50 per cent on its previous goal. Backed by Blackstone, it is an example of how institutional investors can add supply to the sector. With high quality, affordable housing, it delivers housing for those on local authority housing lists.
This story may seem like an outlier amidst a challenging environment which has only seen the UK’s housing crisis deepen. It shows that through welcoming outside investment, the government can fulfil its goal of providing quality affordable homes, at scale, and at pace across the country.
It is not only house building that needs more capital; investment in existing housing stock is also falling short. The government has set the target of having as many homes as possible in EPC band C by 2035 – the third highest performing energy category. But the average house is still only rated band D.
The current energy crisis has emphasised the need to ensure homes are energy efficient, with many households facing 50 per cent increases in their energy bills this year. Investment must be part of the solution.
St Modwen, which builds homes as well as owning and managing several logistics and industrial assets, is set to deliver the first carbon-negative properties capable on scale in the UK. The test homes have delivered an overall reduction in Co2 emissions, and a saving of 50 per cent on energy bills.
The government, local authorities and housing associations have the huge challenge of making existing housing stock safe and environmentally sustainable. By supporting private investment into housing, the government has a golden opportunity to set itself up to deliver the quality homes needed by millions across the country.