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 that 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 the fact that people are living
longer, official reports state that 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 (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 that the long-term trend of new homes building (the yellow dotted line) has been going
in an upward direction. In fact, the 2018 new homes build stats for Charnwood are
45.7% above the post Millennium average.
But, we still need more homes and who is going to build, and pay, for them? Some Loughborough people will say 'why can’t the local
authority build most of them?' In 2018, 1070 new dwellings were created in the Charnwood
Council area and, of those 1070, interestingly 253 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 as well as 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 Charnwood, 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 Loughborough
homeowners and Loughborough 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 4.7 million long term housing shortage means that 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 Loughborough rents, this can only be good news for Loughborough
landlords. This attention on the housing crisis by the Government is good news
for all Loughborough homeowners and Loughborough buy to let landlords, as it
will encourage more fluidity in the market in the longer term, sharing the
wealth and benefits of home ownership 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.
For more thoughts on the Loughborough Property market, and to discuss any of our available properties, please feel free to call me on 01509 260777 or email me
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