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Following a lengthy leadership battle Liz Truss has won the race to become head of the Conservative Party, and by default, the UK’s new Prime Minister. Along with her new title she inherits a growing roster of pressing issues to face, including inflation, the rising cost-of-living and an unparalleled energy crisis.
In addition, the new PM steps into leadership amidst a long and arduous housing crisis, which is currently preventing the sector from reaching its true potential in providing homes to hard-working people who yearn to get on the property ladder.
So, what will Liz Truss’ appointment mean for the country’s property sector and how does she believe the housing crisis should be tackled?
Generation Rent
In line with the prioritises acknowledged by her predecessor Boris Johnson, Truss has stated that upon appointment she will attach particular focus on supporting young renters buy their first homes. This follows official government statistics released in June that state 50% of today’s renters could afford the cost of monthly mortgage payments, compared with only 6% who could immediately access a typical first-time buyer mortgage. This is due to current lending restrictions and deposit requirements which can prevent young buyers from proving their affordability.
As it currently stands, many renters are paying more for accommodation in monthly payments than they potentially would for a mortage. However, a growing housing market means it is difficult to achieve a definitive deposit savings goal for many would-be buyers as prices inflate and housing demand continues to outweigh supply.
To combat this issue, Truss has vowed, as part of an upcoming government review into the mortage market, to introduce changes that would see rental payments taken into an account when evaluating affordability. This follows a poll conducted by YouGov earlier this year which found that 76% of people think that this should be a consideration for lenders in the mortage application process.
These changes have the potential to transform the housing market. During 2021 a House of Commons Library briefing paper showed that home ownership has declined over the years, with 71% of households being homeowners in 2003 compared to 65% in 2020. The same paper states that 86% said their preference would be to buy their own home. The appetite for buying combined with changes to affordability assessments has the potential to open the door to thousands of potential buyers and could lead to a significant boost in the market. However, there is work to be done to ensure that there are enough homes for this spike given the current housing crisis.
Housing Crisis
Last year, government figures revealed that housing stock shrank by 11% although demand continues to increase. This is despite the Conservative’s 2018 Manifesto promise to build 300,000 homes per year by the mid-2020s. A pledge that Liz Truss has confirmed she will abolish, not least due to its failings, but to make way for a more localised approach.
Truss has stated she wants to take the core decisions made on housing away from central government and speak with local councils on what is required for them to meet meaningful individualised quotas with communities in mind. This comes following a report from the Royal Town Planning Institute which found that over the last decade, local authorities have reduced spending on planning by 43%. This is a figure Liz Truss looks to change over her tenure.
Truss says: “We will work with local communities to identify sites ripe for transformation across the country through lower taxes, reduced planning restrictions and red tape. These zones would open the floodgates to new waves of investment.”
She is looking to create investment zones in towns across the country, offering lower taxes to stimulate investment and reduce planning restrictions to ensure property can be built at a rapid pace. Such stipulations have delayed the builds of many properties in the past which is bad news for a sector struggling to hit targets.
This planning reform will see fewer regulations laid out for builders. This will boost the growth experienced across the property sector, ensuring that housing demand is addressed quickly. In turn, this will create thriving hubs; generating vast ground for economic growth and more development opportunities in the future.
It is still early days, so only time will tell if this approach can help improve the housing crisis and economic prospects across the country. There is no doubt that clearer targets will need to be laid bare to understand the effects this will have in making housing a more affordable and realistic prospect for buyers.
Should these plans go ahead developers and investors alike will reap the benefits, with reduced planning restrictions, builds will be able to get underway at a faster rate. Combine this with homeownership being open to more people, there will be increasing demand for homes in thriving areas.
Simon Clarke’s Appointment
The announcement of Truss’ cabinet followed a day after her appointment as PM, with Simon Clarke being declared as Secretary for Levelling Up, Housing and Communities. Clarke, who previously served in the Ministry of Housing, Communities and Local Government had the following to say upon appointment:
“This is a department that I know really well, and which I am so looking forward to returning to – the commitment and expertise of officials there on themes as diverse as homelessness, building safety and devolution is second to none.” He has a history of backing regeneration programmes, and his support for devolution has been a constant throughout his political career. Mirroring the views of his current boss, he strongly backs the notion of local councils having more power in the making of decisions that best serve communities.
As mentioned, this means we will see a step back from the original Manifesto’s promise on 300,000 homes per year, in favour of a more localised approach with communities being empowered to make key decisions on where best to place new homes and how many there should be.
It is unclear if this outlook combats the issue of the housing crisis, which will benefit from builds taking place sooner, rather than later. In whatever manner they choose to move forward, changes on these matters will need to be quick and decisive. This is needed to give reassurance to developers who have been faced with uncertainty around the housing crisis for several years. In addition, Clarke’s keen support of devolution is welcome news because developers will be able to tap into the knowledge of representatives who know their communities well and can help them to identify the best areas to develop in.
Throughout her campaign to become PM, Liz Truss has put much emphasis on how to get the economy moving again and her comments on housing and the property sector look promising. However, it is early days, and she has some incredibly important decisions to consider in her first few months in office. One thing for certain is that she will be required to make these changes rapidly to ensure we can continue to create homes for those that need them most.
No matter what the future holds, HJ Collection continues to contribute to easing the country’s housing shortage, with the environment in mind. We currently have key developments across the entire country and are passionate about maximising the potential of the UK’s property market, while continuing to deliver above average returns to our investors.
If you have any questions about what the PM’s appointment could mean for the property industry, please don’t hesitate to get in touch with us.