House building, which is largely done by the private sector, is in a long-term decline. In 2016 around 170,000 houses were built. This is down from a peak between 1965-1970 during Harold Wilson Labour administration, where around 300,000 to 350,000 houses were being built each year. Several factors have been alluded to detailing why this might potentially be the case. In 2017 a report by the estate agent Knight Frank identified the planning system as “one of the biggest hurdles to development”.
It stated that “The imbalance between the demand and supply of housing is why housebuilding has risen so rapidly up the political agenda in recent years.”. This is extrapolated further in later in the report where Knight Frank states that the UK population is rising at a pace that equates to around 200,000 to 250,000 a year, a figure backed by home office statistics.
Weighed against current house building rates, which currently sit at around 160,000 when averaged over the past 15 years, this appears to paint a dismal picture indeed. Other issues highlighted by Knight Frank’s report is the rising cost of housing, which was previously masked by a considerable amount of deregulation in the mortgage credit industry. This saw some lenders offering up to 125% of the cost of a home to new buyers.
Following the financial crisis of 2008 and the subsequent changes in mortgage credit terms, many lenders required 25% as a deposit, excluding many potential homeowners. Changes in stamp duty which, back in 1997, was previously fixed at 1% for all transactions and now varies between 2 – 15% on properties upwards of 125,000, could also point to another potential hurdle.