Yann Murciano, CEO at development finance lender Blend, writes an open letter to the Secretary of State for Levelling Up, Housing and Communities on how to protect mid-size property developers and ensure the current government (at last) hits its target of building 300,000 houses per year.
The government has long pledged its commitment to tackling the UK’s housing shortage, which began not because of a blip lasting one year, but because not enough homes were built over many decades. This commitment goes back to 2015, when the government promised to deliver a million new homes by 2020, a promise it restated at the general election two years later. In 2019, the then PM Theresa May described solving the housing crisis as ‘the biggest domestic policy challenge of our generation’ and pledged to “continue progress towards our target of 300,000 homes a year by the mid-2020s”. As recently as last week, Michael Gove the Secretary of State for Levelling Up, Housing and Communities recommitted to this pledge despite citing challenges and said the government remains committed to this target. Yet, despite the government’s efforts to boost construction, new-built housing completions in England between 2010 and 2020 was approximately 130,000 per year – well below the 147,000 of the 2000’s or 150,000 of the 1990’s, and half of the level seen in the 1960’s and 1970’s. The current credit tightness will likely hurt new housing developments even further and curb supply.
So, why hasn’t the government been able to deliver on its promise of boosting UK housing supply? I believe the answer to this question can be traced to Albert Einstein's famous line: “Insanity is doing the same thing over and over and expecting different results.” Indeed, the government’s housing policy has revolved around doing the same thing over and over again and expecting different results.
As Einsten said, "insanity is doing the same thing over and over and expecting different results". The government’s housing policy has revolved around doing the same thing over and over again and expecting different results.
Yann Murciano, Blend CEO
A new government always brings in high hopes and so if this government is serious about achieving its target of 300,000 homes a year, here are three things it needs to do.
First, planning reform is urgently needed. The planning system and the speed at which it operates has historically been one of the biggest hurdles in delivery of UK housing and is why so many mid-size housebuilders have closed or been absorbed by larger players in recent decades. In 1988 small builders were building 40% of new-built homes compared with just 12% today. Planning committees and their structure need overhauling to save developments being caught in months, if not years, of process treacle. In other words, this government needs to make it easier to obtain planning consent. This will, in turn, encourage rapid development of new housing.
Second, specialist financial providers need to be brough into the fold to help tackle the housing crisis. Lack of funding, especially among SME property developers and small construction companies, is a key reason for the disappearance of so many mid-size housebuilders over the past two decades. And one concrete and effective way for the government to support housebuilding is by working with specialist development finance lenders to channel funding to SME developers. These specialist lenders were able to show their key role by keeping credit flowing when the pandemic led to the 'lockdown on lending' at traditional lenders who were busy administering the Coronavirus Business Interruption Loan Scheme (CBILS). Due to their nimble size, flexibility and efficiency, specialist development finance lenders have demonstrated that they can and must be part of the solution to the UK housing crisis.
Third, the private rental market –the “wild west’ of Britain’s housing stock” - needs to be professionalised.
CEO at Blend
BLEND Loan Network Limited is authorised and regulated by the Financial Conduct Authority (Reg No: 913456).
BLEND Loan Network Limited is registered in England and Wales. Registered office: Evelyn House, 142 New Cavendish Street, London W1W 6YF.
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