Nationally, the number of new
homes created in 2018 was 222,194, the highest since 1989. Yet since 2002, the
average number of properties built in the UK has only been 146,700 per year.
You would think, seeing all the new homes sites around, you could ask are we
building too many houses, especially off the back of those impressive 2018
build figures? However, to keep up with the ever-growing population, lifestyles
and people living longer, official reports state the Country actually needs
240,000 new homes built every year to just stand still.
It is estimated, by
the Chartered Institute of Housing, that the current national
backlog of new homes required is in the order of 4.7 million (i.e. because of the bottled-up household
formation by younger adults living with parents, shared housing and
unaffordability). As a Country, we cannot meet all these needs immediately
and it will take time to build up an effectual plan to address these issues. Looking closer to home, you will also see from the graph below the long-term trend of new homes building (the yellow dotted line) has been going in a downward direction. Although, the 2018 new homes build stats for Kirklees are 5.3% above the post Millennium average.
The cure is simple: we need more homes… yet who is going to build (and
pay) for them. Some Huddersfield people will say why can’t the local authority build
most of them?
In 2018, 1,330 new dwellings were created
in the Kirklees Council area and of those 1,330; interestingly 75 were Council and Housing
Association homes
So, if our local authority had a more ambitious annual target of say an
additional 500 homes on top of those figures, where could they be built and how
would they be paid for? Of course, there are the normal apprehensions about infrastructure
issues such as roads, schools, hospital capacity and doctors’ surgeries but our
local authority has a Local Plan and that has the locations of where they
envisage the new housing will be built (and the infrastructure that goes with
it).
The Tories lifted the cap on what local authorities could borrow to
build Council houses in late 2018 meaning Councils could borrow more money to
build more Council houses. Let’s say we built those 500 homes a year for the
next 5 years in Kirklees, that would cost the local authority £375 million to
build, which would produce in total £17.4 million in rent. At current interest
rates, the interest would be £9.5m per year leaving a surplus of £7.9m for
property maintenance and management – meaning the Council houses pay for
themselves!
Therefore, what does all this mean
for Huddersfield homeowners and Huddersfield buy-to-let landlords?
Well, the chances of our local
authority getting the full funding for an extra 500 homes a year is slim as
there is only so much money to borrow. If every UK local authority got funding
for 500 additional homes a year for the next 5 years, an impressive 867,500
homes would be built in those 5 years but that would require the councils to
borrow £130.1bn – and Central Government doesn’t have that kind of money for
Councils to borrow (more like £10bn to £15bn).
The 4.7million long term housing
shortage means house prices will remain strong in the long term (despite blips
like Brexit etc). Demand for private rental properties will continue to grow
and if you read my recent article on Huddersfield rents, this can only be good
news for Huddersfield landlords. This attention on the housing crisis by the Government
is good news for all Huddersfield homeowners and Huddersfield buy to let
landlords, as it will encourage more fluidity in the market in the longer term,
sharing the wealth and benefits of homeownership for all. However, in the short
term, demand still outstrips supply for homes and that will mean continued
upward pressures on rents for tenants and stability on house prices.
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