With a year to go before the general election, new housing, investment and planning are high on the political agenda. All three main parties agree that we are experiencing a housing shortage and much of the debate revolves around house building numbers.

Developers have been responding to an improving housing market and the increasing demand for new homes. Building starts rose by 24% to 123,000 in 2013. This is an improvement in the number of completions which totalled 110,000 but more is needed.

The Labour party aspires to increase housebuilding by more than 200,000 new homes a year. The Liberal Democrats have gone further by calling for 300,000 dwellings a year, arguing we must provide not only for projected need but also cover the backlog that has built up.

While the Conservatives have not set a housebuilding target, it has been Coalition Government's policy to support the housing market as a mechanism for stimulating consumer confidence, creating jobs and therefore supporting economic growth. The general consensus on the need for more homes, however, masks local disagreements over what is to be built where.

Planning barriers

The planning system is often cited as a constraint on growth. A survey by the Home Builders Federation (HBF) emphasises that planning delays are a far greater constraint to housebuilding than other stumbling blocks including lack of materials, scarcity of land or labour shortage.

Planning reforms over the last four years have sought to address these criticisms. The most significant change was the publication of the National Planning Policy Framework (NPPF) in 2012. The document asserts a “presumption in favour of sustainable development” and requires that all Local Planning Authorities (LPA) maintain a five-year supply of readily developable housing land.

Despite this call for a more positive attitude to development, Savills analysis reveals that very few LPAs have embraced a growth agenda and planned for more housing. Of the 50 LPAs with a local plan made since the NPPF, which has either been adopted or is close to being approved, only 15 (30%) are planning to deliver more homes than under the previous planning system.

Housing shortfall

The local plans cause even greater concern when compared with housing needs projections. Analysis by Cambridge University for the Town & Country Planning Association (TCPA) concludes we need 240,000 new homes a year (the equivalent of a 1.04% increase in stock, see Map 5.1) in England over the 20 years to 2031. Of these, 152,900 homes a year are needed across London, East of England, South East and South West.

The locally planned targets will leave these regions 21% short of their housing requirements before taking into account the backlog of need. In other words, we face a shortfall of more than 160,000 homes over the next five years in southern England.

Click the below image to enlarge

London overspill

The biggest deficiency will be in London. Our analysis using TCPA projections, identifies a shortfall of 14,400 homes a year in the capital. This is the equivalent of 72,000 over the next five years, a far greater number than the shortage identified by the Greater London Authority (GLA).

Outside London, the housing shortfall across the South East, South West and East of England will add up to 91,323 over the next five years. This is before we take into account the added demand that is likely to spill out of the capital over the coming years.

Strong house price growth in London has resulted in substantial price differences between the city and the Homes Counties. We expect to see more people move out in search of better value for money which will put pressure on the markets with 
the strongest migration links to London. Hence the Local Authorities likely to suffer the biggest shortfalls include Sevenoaks, Guildford, Windsor and Maidenhead.

Green Belt

Green Belt land remains protected against development. However, it is clear London cannot accommodate the needs of its expanding population within the boundaries of its 32 boroughs. Hence the LPAs in the Home Counties will come under increasing pressure to house not only local people but also those leaving London in search of housing. The extra demand will require careful balance between meeting housing needs and reviewing an appropriate Green Belt.

Are LPAs running out of space?

Analysis of land supply shows that of the 147 Local Planning Authorities across the three regions of our study, 102 (69%) claim that they have more than five years’ supply and 61% say they have more than 5.25 years’ supply. Recent appeals have exposed the fact the claimed land supply figures are not always robust when scrutinised in detail because housing needs have been underestimated.

Click the below image to enlarge

Taken from
Residential Property Focus Q2 2014