It has recently been reported that the affordable home crisis in Ireland has reached breaking point. Some have even speculated that it’s ‘the social issue of our time’ but the sad reality is that the lack of affordable homes isn’t just affecting Ireland; it’s a widespread issue throughout the UK.

What has caused such a crisis?

Recent reports on the UK government’s housing plan between 2015-2020 suggest that almost every target set has been missed thus far, leading some to believe that “by 2020 homeownership will be an 'impossible dream' for those not already on the ladder”. It has been estimated that the need for housing in England alone is currently two to three times higher than  the current supply.

It is thought that the current ‘dysfunctional’ housing market is a direct result of local governments stepping away from the building of new houses, leaving the responsibility in the hands of not-for-profit organisations, which are struggling to provide thanks to a reduction of the capital subsidy.

What is needed?

The country is in need of 200,000 to 300,000 new properties - a margin not seen since the 1970s - which presents a demand for property developers to step in, though some doubt whether building more homes will provide a solution. Property developers face a challenge due to constraints in the planning system, as well as a shortage of available land. Many areas employ strong policies to protect green spaces, which have been highly effective in preventing urban sprawl and, in light of other social challenges, such as climate change and food security, it seems impossible to find a one-size-fits-all solution.

Can the crisis be solved?

However, a solution must come. London Mayor Sadiq Khan is looking to increase the supply of lower-cost homes and has assured property developers that private development proposals that have at least 35% affordable units will be fast tracked through the process by the capital’s council. Whether this scheme will prove effective, or be adopted by other councils throughout the UK is still very much up for debate, but the effects on property developers would be both positive and negative. For developers willing to offer affordable housing, it looks like their schemes will be more strongly favoured by councils, but with some developers unwilling or unable to offer such proposals, it’s clear a compromise will have to be reached somewhere along the line. 

It’s no secret that the housing crisis in the UK is one that has been getting progressively worse for a number of years, with the Prime Minister stating that it was her personal mission to ‘fix’ the situation towards the end of last year.

At present, the building of new houses in the UK is controlled by a handful of large developers, with the number of SME housebuilders declining by around 80%.

It wasn’t always like this. Back in the 60s the top 10 housebuilders only accounted for 9 percent of new housing production. The rest was supplied by small, often family-led businesses.

The shift in the building of new homes has often been accredited to the difficulties associated with obtaining finance, with 54% of SMEs claiming that a lack of funding was the obstacle that stood in the way of getting the work done.

Alternative finance is, however, beginning to plug this gap and offer a resolution to SMEs that would otherwise struggle to complete building projects.

Providers of alternative sources of finance have been establishing their position in the SME property value chain, and it’s not hard to see why.

This type of finance tends to be uninhibited by things such as legacy loan books, outdated and lengthy technology processes and regulatory constraint, making it much more attainable for smaller businesses who can’t obtain the funds that they need through banks.

Despite these progressions, there are still a number of changes that the Government could implement that would further support the work of small building businesses.

Reintroducing the pre-1990 presumption in favour of development, particularly for small brownfield sites that lie within existing settlements would certainly help.

Doing so would help to unlock areas of unused land for SMEs while simultaneously protecting the greenbelt and undeveloped areas.

Areas suffering from significant housing shortages would benefit if the reclassification of garden land to “greenfield” land was reversed. This was a lifeline that many small businesses previously relied on to stay in business.

It seems that the presence of the Government’s Help-To-Buy scheme has done plenty to boost the demand for houses, just not the supply. Perhaps now is the time for a Help-To-Build scheme to also be implemented…

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